GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2015

H                                                                                                                                                   D

HOUSE DRH40047-MQx-18  (01/28)

 

 

 

Short Title:        Omnibus Economic Development Improvements.

(Public)

Sponsors:

Representatives Hamilton and R. Moore (Primary Sponsors).

Referred to:

 

 

A BILL TO BE ENTITLED

AN ACT to restore various tax credits and incentives for economic development.

The General Assembly of North Carolina enacts:

 

PART I.  JOB CATALYST FUND

SECTION 1.(a)  The title of Part 2G of Article 10 of Chapter 143B of the General Statutes reads as rewritten:

"Part 2G. Job Development Investment Grant Program.Development."

SECTION 1.(b)  G.S. 143B‑437.51 reads as rewritten:

"§ 143B‑437.51.  Definitions.

The following definitions apply in this Part:

…

(6)        Full‑time employee. – A person who is employed for consideration for at least 35 hours a week, whose wages are subject to withholding under Article 4A of Chapter 105 of the General Statutes, and who is determined by the Committee to be employed in a permanent position according to criteria it develops in consultation with the Attorney General. The term does not include any person who works as an independent contractor or on a consulting basis for the business.

(6a)      Full‑time worker. – A person who is employed for consideration for at least 35 hours a week, whose wages are subject to withholding under Article 4A of Chapter 105 of the General Statutes, and who is determined by the Department to be employed in a permanent position. The term does not include any person who works as an independent contractor or on a consulting basis for the business.

(7)        New employee. – A full‑time employee or a full‑time worker who represents a net increase in the number of the business's employees or workers statewide.

…."

SECTION 1.(c)  G.S. 143B‑437.52 reads as rewritten:

"Subpart A. Job Development Investment Grant Program.

"§ 143B‑437.52.  Job Development Investment Grant Program.

(a)        Program. – There is established the Job Development Investment Grant Program to be administered by the Economic Investment Committee. In order to foster job creation and investment in the economy of this State, the Committee may enter into agreements with businesses to provide grants in accordance with the provisions of this Part. The Committee, in consultation with the Attorney General, shall develop criteria to be used in determining whether the conditions of this section are satisfied and whether the project described in the application is otherwise consistent with the purposes of this Part. Before entering into an agreement, the Committee must find that all the following conditions are met:

…."

SECTION 1.(d)  The Revisor of Statutes is authorized to change references of "this Part" in Subpart A of Part 2G of Article 10 of Chapter 143B of the General Statutes to "this Subpart" as appropriate.

SECTION 1.(e)  Part 2G of Article 10 of Chapter 143B of the General Statutes is amended by adding a new Subpart to read:

"Subpart B. Job Catalyst Fund.

"§ 143B‑437.67.  Job Catalyst Fund.

(a)        Creation and Purpose of Fund. – There is created in the Department of Commerce a special, nonreverting account to be known as the Job Catalyst Fund to provide funds to a local governmental unit for projects that result in the creation of jobs. The Secretary of Commerce is solely responsible for the administration of the program and shall adopt guidelines applicable to program administration. The guidelines shall include the following provisions, which shall apply to each grant from the account:

(1)        The funds are reserved for a project for which a business agrees to create and maintain, for the greater of 10 years or a time period not less than the sum of the full term of the grant plus five years, the number of new worker positions at the project as follows:

a.         For development tier one areas, 500 full‑time workers.

b.         For development tier two areas, 800 full‑time workers.

c.         For development tier three areas, 1,200 full‑time workers.

(2)        The funds are reserved for a project for which a business agrees to make an investment at the project as provided in this subdivision. The investment required by this subdivision must be private funds in improvements to real property and additions to tangible personal property located at the project for the greater of 10 years or a time period not less than the sum of the full term of the grant plus five years. The investment must be commenced no later than the time when the first disbursement is made to the business and must be completed no later than five years from the time the first disbursement is made to the business. Tangible personal property transferred by the business or from a related member of the business from one area in the State to the project is not considered an investment in tangible personal property located at the project for purposes of this section. The Department shall certify the amount of the investment made by the business at the project. The minimum investment at the project the business agrees to make is as follows:

a.         For development tier one areas, twenty million dollars ($20,000,000).

b.         For development tier two areas, thirty‑five million dollars ($35,000,000).

c.         For development tier three areas, fifty million dollars ($50,000,000).

(3)        The funds are (i) used to acquire or improve land or infrastructure, for facility development, or for capital investment and (ii) used for manufacturing projects. For purposes of this subdivision, "manufacturing" is defined in G.S. 143B‑437.01.

(4)        The funds are provided to a local governmental unit, and the local governmental unit matches a portion of the funds allocated by the Department as provided in this subdivision. A local match may include cash, fee waivers, in‑kind services, the donation of assets, the provision of infrastructure, or a combination of these. The local match requirement is as follows:

a.         For development tier one areas, a local match of at least three dollars ($3.00) for every one hundred dollars ($100.00) from the State is required.

b.         For development tier two areas, a local match of at least six dollars ($6.00) for every one hundred dollars ($100.00) from the State is required.

c.         For development tier three areas, a local match of at least nine dollars ($9.00) for every one hundred dollars ($100.00) from the State is required.

(5)        The funds are reserved for a project for which a business agrees to meet, for the greater of 10 years or a time period not less than the sum of the full term of the grant plus five years, the wage standard provided in this subdivision for all full‑time workers at the project. In making the wage calculation, all full‑time position jobs filled during the year for at least 1,600 hours are included. The required wage standard is as follows:

a.         For development tier one and two areas, an average weekly wage that is at least equal to one hundred percent (100%) of the average wage for all insured private employers in the county.

b.         For development tier three areas, an average weekly wage that is at least equal to one hundred ten percent (110%) of the average wage for all insured private employers in the county.

(6)        The funds are reserved for projects for which a business agrees to meet, for the greater of 10 years or a time period not less than the sum of the full term of the grant plus five years, a requirement to provide health insurance for all full‑time workers at the project. For purposes of this subdivision, a business provides health insurance if it pays at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. 58‑50‑125. A business shall provide a certification that it continues to provide health insurance as required by this subdivision.

(7)        The funds are not used for a project at which is located, during the greater of 10 years or a time period not less than the sum of the full term of the grant plus five years, a business that has received a notice of an overdue tax debt and that overdue tax debt has not been satisfied or otherwise resolved.

(8)        The funds are not used in favor of jobs created or property investments made for which a business receives a tax credit under Article 3J of Chapter 105 of the General Statutes.

(9)        The funds are reserved for projects for a business that has no citations under the Occupational Safety and Health Act that have become a final order within the past three years for willful serious violations or for failing to abate serious violations. In addition, the business must, for the greater of 10 years or a time period not less than the sum of the full term of the grant plus five years, have no citations under the Occupational Safety and Health Act that have become a final order within the past three years for willful serious violations or for failing to abate serious violations with respect to the project. For purposes of this subsection, "serious violation" has the same meaning as in G.S. 95‑127.

(10)      The funds are not used for a project that consists of a professional or semiprofessional sports team or club or a project that consists solely of retail facilities. If a project consists of both retail facilities and nonretail facilities, only the portion of the project consisting of nonretail facilities is eligible for a grant, and only full‑time workers employed exclusively in the portion of the project that represents nonretail facilities may be counted for purposes of fulfilling the new worker position requirement. If a warehouse facility is part of a retail facility and supplies only that retail facility, the warehouse facility investment and full‑time workers are not counted for purposes of the requirements of this section. For the purposes of this Subpart, catalog distribution centers are not retail facilities.

(b)        Forfeiture. – If the business at the project fails to timely create and maintain the required new jobs, to timely make the required level of investment, or to otherwise meet the requirements of this section, the local governmental unit shall provide a means to recapture from the business at the project an amount equal to the amount disbursed from the Fund for the project, and the local governmental unit must reimburse the Fund for that disbursement.

(c)        Records. – A business located at a project for which a grant was made from the Fund shall maintain records and make available for inspection by the Secretary of Commerce any records the Secretary considers necessary to determine and verify the business has met the requirements of this section.

(d)        Report. – The Department shall publish a report on the Job Catalyst Fund on or before April 30 of each year. The Department shall submit the report electronically to the House of Representatives Finance Committee, the Senate Finance Committee, the House of Representatives Appropriations Subcommittee on Natural and Economic Resources, the Senate Appropriations Committee on Natural and Economic Resources, and the Fiscal Research Division. The report shall include the following:

(1)        A listing of each grant awarded during the preceding calendar year, including the name of the business locating at the project, a description of the project, the term of the grant, and the liability under the grant.

(2)        An update on the status of projects under grants awarded before the preceding calendar year.

(3)        The number and development tier area of new worker positions to be created by projects with respect to which grants have been awarded.

(4)        A listing of the employment level for all businesses located at projects with respect to which grants have been awarded and any changes in those levels from the level of the next preceding year.

(5)        The wage levels of all new worker positions to be created at projects with respect to which grants have been awarded, aggregated, and listed in increments of ten thousand dollars ($10,000) or other appropriate increments.

(6)        The number of awards made for projects for new businesses and the number of awards made for projects for existing, expanding businesses in the preceding calendar year.

(7)        The environmental impact of businesses at projects with respect to which grants have been awarded.

(8)        The geographic distribution of grants, by number and amount, awarded under the program.

(9)        For the first annual report after adoption of the guidelines developed by the Department to implement this Subpart, a copy of such guidelines, and, for subsequent reports, identification of any changes in those guidelines from the previous calendar year."

SECTION 1.(f)  The Secretary of Commerce shall develop guidelines related to the administration of the Jobs Catalyst Fund, as authorized by this section, and to the selection of projects. At least 20 days before the effective date of any guidelines or nontechnical amendments to guidelines, the proposed guidelines must be published on the Department's Web site and provide notice to persons who have requested notice of proposed guidelines. In addition, the Department of Commerce shall accept oral and written comments on the proposed guidelines during the 15 business days beginning on the first day the notice requirement of this subsection have been completed. For purposes of this subsection, a technical amendment is one that corrects a spelling or grammatical error or that makes a clarification based on public comment and could have been anticipated by the public notice that immediately preceded the public comment.

SECTION 1.(g)  G.S. 150B‑1(d) reads as rewritten:

"(d)      Exemptions from Rule Making. – Article 2A of this Chapter does not apply to the following:

…

(10)      The Economic Investment Committee in developing criteria for the Job Development Investment Grant Program under Part 2FSubpart A of Part 2G of Article 10 of Chapter 143B of the General Statutes.

(10a)    The Secretary of Commerce in developing criteria for the Job Catalyst Fund under Subpart B of Part 2G of Article 10 of Chapter 143B of the General Statutes.

…."

SECTION 1.(h)  G.S. 143B‑437.07(c) reads as rewritten:

"(c)       Economic Development Incentive. – An economic development incentive includes any grant from the following programs: Job Development Investment Grant Program; the Job Catalyst Fund; the Job Maintenance and Capital Development Fund; One North Carolina Fund; and the Utility Account. The State also incents economic development through the use of tax expenditures in the form of tax credits and refunds. The Department of Revenue must report annually on these statutory economic development incentives, as required under G.S. 105‑256."

SECTION 1.(i)  The unencumbered cash balance of the Job Catalyst Fund (Budget Code 14600‑1912) may be used for the purposes Job Catalyst Fund, as created by this Part.

SECTION 1.(j)  This Part is effective when it becomes law.

 

PART II.  NEW MARKETS JOBS ACT OF 2015

SECTION 2.(a)  Chapter 105 of the General Statutes is amended by adding a new Article to read:

"Article 3L.

"North Carolina New Markets Jobs Act of 2015.

"§ 105‑129.100.  Short title.

The provisions of this Article shall be known and may be cited as the "North Carolina New Markets Jobs Act of 2015."

"§ 105‑129.101.  Definitions.

The following definitions apply in this Article:

(1)        Affiliate. – An entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the entity specified.

(2)        Applicable percentage. – Zero percent (0%) for the first two reduction allowance dates, twelve percent (12%) for the next three reduction allowance dates, and eleven percent (11%) for the following two reduction allowance dates.

(3)        Below the line reduction of tax or "reduction." – A subtraction from the total amount of State premium tax liability made after all additions and deductions have been made to the gross premium amount and after the appropriate rates of tax have been applied; for the purposes of constitutional, statutory, and common law interpretation and enforcement, the reduction shall be afforded the same property and contractual protections as a credit.

(4)        Department. – The Department of Commerce.

(5)        Long‑term debt security. – Any debt instrument issued by a qualified community development entity, at par value or a premium, with an original maturity date of at least seven years from the date of its issuance, with no acceleration of repayment, amortization, or prepayment features prior to its original maturity date. The qualified community development entity that issues the debt instrument may not make cash interest payments on the debt instrument during the period beginning on the date of issuance and ending on the final reduction allowance date in an amount that exceeds the cumulative operating income, as defined by regulations adopted under section 45D of the Internal Revenue Code of 1986, as amended, of the qualified community development entity for that period prior to giving effect to the interest expense of such long‑term debt security. The foregoing shall in no way limit the holder's ability to accelerate payments on the debt instrument in situations where the qualified community development entity has defaulted on covenants designed to ensure compliance with this section or section 45D of the Internal Revenue Code of 1986, as amended.

(6)        Purchase price. – The amount paid to the qualified community development entity upon the issuance of a qualified equity investment.

(7)        Qualified active low‑income community business. – The meaning given such term in section 45D of the Internal Revenue Code of 1986, as amended, and 26 C.F.R. § 1.45D‑1 but limited to those businesses meeting the SBA size eligibility standards established in 13 C.F.R. § 121.101‑201 at the time the qualified low‑income community investment is made. A business shall be considered a qualified active low‑income community business for the duration of the qualified community development entity's investment in or loan to the business if the entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low‑income community business, other than the SBA size standards, throughout the entire period of the investment or loan. The term excludes any business that derives or projects to derive fifteen percent (15%) or more of its annual revenue from the rental or sale of real estate. This exclusion does not apply to a business that is controlled by or under common control with another business if the second business (i) does not derive or project to derive fifteen percent (15%) or more of its annual revenue from the rental or sale of real estate and (ii) is the primary tenant of the real estate leased from the first business.

(8)        Qualified community development entity. – The meaning given such term in section 45D of the Internal Revenue Code of 1986, as amended; provided that such entity has entered into, for the current year or any prior year, an allocation agreement with the Community Development Financial Institutions Fund of the U.S. Treasury Department with respect to credits authorized by section 45D of the Internal Revenue Code of 1986, as amended, which includes the State of North Carolina within the service area set forth in the allocation agreement. The term shall include qualified community development entities that are controlled by or are under common control with the qualified community development entity.

(9)        Qualified equity investment. – Any equity investment in or long‑term debt security issued by a qualified community development entity that meets each of the following requirements:

a.         Is acquired after the effective date of this act at its original issuance solely in exchange for cash.

b.         Has at least eighty‑five percent (85%) of its cash purchase price used by the qualified community development entity to make qualified low‑income community investments in qualified active low‑income community businesses located in this State by the first anniversary of the initial reduction allowance date.

c.         Is designated by the qualified community development entity as a qualified equity investment under this subdivision and is certified by the Department as not exceeding the limitation contained in G.S. 105‑129.102(d)(5). This term shall include any qualified equity investment that does not meet the provisions of sub‑subdivision a. of this subdivision if such investment was a qualified equity investment in the hands of a prior holder.

(10)      Qualified low‑income community investment. – Any capital or equity investment in or loan to any qualified active low‑income community business. With respect to any one qualified active low‑income community business, the maximum amount of qualified low‑income community investments made in such business, on a collective basis with all of the businesses' affiliates, with the proceeds of qualified equity investments certified under G.S. 105‑129.102(d) that shall count toward satisfaction of the requirements of sub‑subdivision b. of G.S. 105‑129.101(9) and sub‑subdivision c. of G.S. 105‑129.102(e)(1) shall be seven million dollars ($7,000,000), exclusive of qualified low‑income community investments made with repaid or redeemed qualified low‑income community investments or interest or profits realized thereon.

(11)      Reduction allowance date. – With respect to any qualified equity investment, the date on which the investment is initially made and each of the six anniversary dates thereafter.

(12)      Rural census tracts. – Any census tract in which a qualified active low‑income community business is located that also is located in a county designated as Tier 1 or Tier 2 by the North Carolina Department of Commerce as of or after 2015.

(13)      Secretary. – The Secretary of Commerce.

(14)      State premium tax liability. – Any liability incurred by any entity under the gross premiums tax or the retaliatory premium tax levied in Article 8B of this Chapter, or, if the tax liability under the gross premiums tax or the retaliatory premium tax levied in Article 8B of this Chapter is eliminated or reduced, the term shall also mean any tax liability imposed on an insurance company or other person that had premium tax liability under the laws of this State.

"§ 105‑129.102.  Reduction for qualified equity investment.

(a)        Reduction Established. – An entity that makes a qualified equity investment earns a vested contractual right to a below‑the‑line reduction of tax applicable to the entity's State premium tax liability on future premium tax reports filed under Article 8B of Chapter 105 of the General Statutes. On or after each reduction allowance date of the qualified equity investment, the taxpayer or subsequent holder of the qualified equity investment may utilize a portion of the tax reduction during the taxable year, including the reduction allowance date. The tax reduction amount is equal to the applicable percentage for the reduction allowance date multiplied by the purchase price paid to the qualified community development entity. The amount of the tax reduction claimed in that taxable year by a taxpayer shall not exceed the amount of such taxpayer's State tax liability for the tax year for which the tax reduction is claimed. Any amount of tax reduction that the taxpayer is prohibited from claiming in a taxable year as a result of this section may be carried forward for use in any subsequent taxable year.

(b)        Transferability. – A tax reduction claimed pursuant to this Article is not refundable or saleable on the open market. Tax reductions earned by or allocated to a partnership, limited liability company, or S Corporation may be allocated to the partners, members, or shareholders of such entity for their use in accordance with the provisions of any agreement among such partners, members, or shareholders. These allocations are not considered a sale for purposes of this section. The Department shall issue a certificate to each entity allocated a tax reduction under this Article.

(c)        Certification of Qualified Equity Investments. – A qualified community development entity that seeks to have an equity investment or long‑term debt security designated as a qualified equity investment and eligible for tax reductions under this section shall apply to the Department, which shall begin accepting applications on July 1, 2015. The qualified community development entity must submit an application on a form that the Department provides that includes each of the following:

(1)        Evidence of the entity's certification as a qualified community development entity, including evidence of the service area of the entity that includes this State.

(2)        A copy of an allocation agreement executed by the entity or its controlling entity and the Community Development Financial Institutions Fund.

(3)        A certificate executed by an executive officer of the entity attesting that the allocation agreement remains in effect and has not been revoked or cancelled by the Community Development Financial Institutions Fund.

(4)        A description of the proposed amount, structure, and purchaser of the qualified equity investment.

(5)        If known, identifying information for any taxpayer eligible to utilize tax reductions earned as a result of the issuance of the qualified equity investment.

(6)        Examples of the types of qualified active low‑income businesses in which the applicant, its controlling entity, or affiliates of its controlling entity have invested under the Federal New Markets Tax Credit Program. Applications are not required to identify qualified active low‑income community businesses in which they will invest when submitting an application.

(7)        A nonrefundable application fee of five thousand dollars ($5,000).

(8)        The refundable performance deposit required by G.S. 105‑129.104.

(9)        Whether the application is for the Rural Reserve under G.S. 105‑129.109.

(d)        (1)        Within 30 days after receipt of a completed application containing the information set forth in subsection (c) of this section, including the payment of the application fee and the performance deposit, the Department shall grant or deny the application in full or in part. If the Department denies any part of the application, it shall inform the qualified community development entity of the grounds for the denial. If the qualified community development entity provides any additional information required by the Department or otherwise completes its application within 15 days of the notice of denial, the application shall be considered completed as of the original date of submission. If the qualified community development entity fails to provide the information or complete its application within the 15‑day period, the application is denied and must be resubmitted in full with a new submission date.

(2)        If the application is deemed complete, the Department shall certify the proposed equity investment or long‑term debt security as a qualified equity investment that is eligible for a reduction under this section, subject to the limitations contained in subdivision (5) of this subsection; provided that the Department shall not certify qualified equity investments for any applicant, on a combined basis with all of its affiliates, in excess of sixty million dollars ($60,000,000) unless such applicant has (i) already had qualified equity investments certified under this section, (ii) satisfied the requirements of subdivision (6) of this subsection with respect to such qualified equity investments, and (iii) filed a new application after satisfying the requirements of (i) and (ii) of this subdivision. The Department shall provide written notice of the certification to the qualified community development entity. The notice shall include the names of those taxpayers who are eligible to utilize the reductions and their respective reduction amounts. If the names of the taxpayers who are eligible to utilize the reductions change due to a transfer of a qualified equity investment or a change in an allocation pursuant to subsection (b) of this section, the qualified community development entity shall notify the Department of such change.

(3)        Once the Department has certified a qualified equity investment, the qualified community development entity may suballocate all or any portion of the amount of the certified qualified equity investment to one or more qualified community development entities with the same controlling entity as the applicant qualified community development entity, provided that the applicant qualified community development entity files a notice of such suballocation with the Department and the recipient of the suballocation meets all the requirements of a qualified community development entity under this section. The notice of suballocation shall include the information required in the application for all suballocatees.

(4)        The Department shall certify qualified equity investments in the order applications are received by the Department. Applications received on the same day shall be deemed to have been received simultaneously. For applications received on the same day and deemed complete, the Department shall certify, consistent with remaining tax reduction capacity, qualified equity investments in proportionate percentages based upon the ratio of the amount of qualified equity investment requested in an application to the total amount of qualified equity investments requested in all applications received on the same day.

(5)        The Department shall certify two hundred eight million three hundred thirty‑three thousand three hundred thirty‑three dollars ($208,333,333) in qualified equity investment authority pursuant to two allocations, one for the Rural Reserve and one for the Statewide Reserve, each as described in G.S. 105‑129.109(a). If a pending request cannot be fully certified due to this limit, the Department shall certify the portion that may be certified unless the qualified community development entity elects to withdraw its request rather than receive partial certification.

(6)        Within 45 days after receiving notice of certification, the qualified community development entity or any transferee under this section shall issue the qualified equity investment and receive cash in the amount of the certified amount. The qualified community development entity or transferee must provide the Department with evidence of the receipt of the cash investment within 50 days of the applicant receiving notice of certification. If the qualified community development entity or transferee does not receive the cash investment and issue the qualified equity investment within 45 days following receipt of the certification notice, the certification shall lapse and the entity may not issue the qualified equity investment without reapplying to the Department for certification. A certification that lapses reverts back to the Department and shall be reissued pro rata to other applicants whose qualified equity investment allocations were reduced under this section and thereafter in accordance with the application process.

(e)        Disallowance. –

(1)        The Department may determine that reductions previously claimed or to be claimed by a taxpayer under this Article should be disallowed. Notice that a reduction shall be disallowed shall be transmitted in writing to the taxpayer and the Department of Revenue. Disallowance may be determined if any of the following occurs:

a.         Any amount of the federal tax credit available with respect to a qualified equity investment that is eligible for a tax reduction under this section is recaptured under section 45D of the Internal Revenue Code of 1986, as amended. In such case, the Department's disallowance shall be proportionate to the federal recapture with respect to such qualified equity investment.

b.         The qualified community development entity redeems or makes principal repayment with respect to a qualified equity investment prior to the seventh anniversary of the issuance of such qualified equity investment. In such case, the Department's disallowance shall be proportionate to the amount of the redemption or repayment with respect to such qualified equity investment.

c.         The qualified community development entity fails to (i) invest at least eighty‑five percent (85%) of the purchase price of the qualified equity investment in qualified low‑income investments in the State within 12 months of the issuance of the qualified equity investment and (ii) maintain such level of investment in qualified low‑income community investments in the State until the last reduction allowance date for the qualified equity investment. For qualified equity investments made under the Rural Reserve, all qualified low‑income community investments required to meet the requirements of this subsection must be made in qualified active low‑income community businesses located in rural census tracts within this State.

d.         Any distribution or debt payment in violation of G.S. 105‑129.107(a).

e.         Failure to comply with G.S. 105‑129.108, 105‑129.109, or 105‑129.110.

(2)        For purposes of this section, an investment shall be considered held by a qualified community development entity even if the investment has been sold or repaid if the qualified community development entity reinvests an amount equal to the capital returned to or recovered by the qualified community development entity from the original investment, exclusive of any profits realized, in another qualified low‑income community investment within 12 months of the receipt of such capital. Periodic amounts received as repayment of principal on a loan that is a qualified low‑income community investment shall be treated as continuously invested in a qualified low‑income community investment if the amounts are reinvested in one or more qualified low‑income community investments by the end of the following calendar year. A qualified community development entity shall not be required to reinvest capital returned from qualified low‑income community investments after the sixth anniversary of the issuance of the qualified equity investment, and the qualified low‑income community investment shall be considered held by the qualified community development entity through the seventh anniversary of the issuance of the qualified equity investment.

(3)        A recaptured reduction and the related qualified equity investment authority under the Rural Reserve or the Statewide Reserve, as applicable, reverts back to the Department and shall be reissued pro rata to other applicants whose qualified equity investment allocations were reduced under this section and thereafter in accordance with the application process.

"§ 105‑129.103.  Notice of noncompliance.

Enforcement of the disallowance under this Article shall not occur until the qualified community development entity shall have been given notice of noncompliance and afforded six months from the date of such notice to cure the noncompliance.

"§ 105‑129.104.  Refundable performance deposit.

(a)        For each application submitted, a qualified community development entity that seeks to have an equity investment or long‑term debt security designated as a qualified equity investment and eligible for a reduction under this Article shall make a performance deposit in the amount of the greater of one‑quarter of one percent (1/4 of 1%) of the amount of the equity investment or long‑term debt security requested to be designated as a qualified equity investment or five hundred thousand dollars ($500,000) to the Department for deposit in the New Markets performance guarantee account, which is hereby established. The entity shall forfeit the amount deposited if (i) the qualified community development entity together with any qualified community development entities to which it has suballocated qualified equity investment authority pursuant to G.S. 105‑129.102(d), if any, fail to issue the total amount of qualified equity investments certified by the Department and receive cash in the total amount certified under G.S. 105‑129.102 within 45 days after receiving notice of certification, or (ii) the qualified community development entity or any qualified community development entity that issues suballocated qualified equity investment authority pursuant to G.S. 105‑129.102(d) certified under this Article fails to invest at least eighty‑five percent (85%) of the purchase price of any qualified equity investment issued in qualified low‑income community investments within 12 months of the issuance of the qualified equity investment; provided that forfeiture for the failure under clauses (i) and (ii) of this subsection is not subject to the cure period established in G.S. 105‑129.103.

(b)        The performance deposit required under this section shall be paid to the Department and held in the New Markets performance guarantee account without any portion being repaid until such time as compliance with clause (ii) of subsection (a) of this section has been established. The qualified community development entity may request a refund of the performance deposit from the Department no sooner than 30 days after having met the requirements of clause (ii) of subsection (a) of this section. The State Treasurer shall have 30 days to comply with the request or give notice of noncompliance.

"§ 105‑129.105.  Letter rulings.

(a)        The Secretary shall issue letter rulings regarding the tax reduction program authorized under this Article, subject to the terms and conditions set forth in this section. For the purposes of this Article, the term "letter ruling" means a written interpretation of law to a specific set of facts provided by the applicant requesting a letter ruling.

(b)        The Secretary shall respond to a request for a letter ruling within 60 days of receipt of such request. The applicant may provide a draft letter ruling for the Secretary's consideration. The applicant may withdraw the request for a letter ruling, in writing, prior to the issuance of the letter ruling. The Secretary may refuse to issue a letter ruling for good cause but must list the specific reasons for refusing to issue the letter ruling. Good cause includes any of the following:

(1)        The applicant requests the director to determine whether a statute is constitutional or a regulation is lawful.

(2)        The request involves a hypothetical situation or alternative plan.

(3)        The facts or issues presented in the request are unclear, overbroad, insufficient, or otherwise inappropriate as a basis upon which to issue a letter ruling.

(4)        The issue is currently being considered in a rule‑making procedure, contested case, or other agency or judicial proceeding that may definitely resolve the issue.

(c)        Letter rulings shall bind the Secretary and the Secretary's agents and their successors and all other State agencies until such time as the entity or its shareholders, members, or partners, as applicable, claim all of the reductions on a North Carolina tax return or report, subject to the terms and conditions set forth in properly published regulations. The letter ruling shall apply only to the applicant.

(d)        In rendering letter rulings and making other determinations under this Article, to the extent applicable, the Department and the Department of Revenue shall look for guidance to section 45D of the Internal Revenue Code of 1986, as amended, and the rules and regulations issued thereunder.

"§ 105‑129.106.  Retaliatory tax.

An entity claiming a reduction under this Article is not required to pay any additional retaliatory tax levied under G.S. 105‑228.8 as a result of claiming the reduction. It is the intent of the General Assembly that an entity claiming a reduction under this Article is not required to pay any additional tax that may arise as a result of claiming that reduction.

"§ 105‑129.107.  Decertification.

(a)        Once certified under this Article, a qualified equity investment may not be decertified unless all of the requirements of this section have been met. Until all qualified equity investments issued by a qualified community development entity or any transferee qualified community development entity under G.S. 105‑129.102(d) are decertified under this section, the qualified community development entity or any transferee qualified community development entity under G.S. 105‑129.102(d) shall not be entitled to distribute to its equity holders or make cash payments on long‑term debt securities that have been designated as qualified equity investments in an amount that exceeds the sum of (i) the cumulative operating income, as defined by regulations adopted under section 45D of the Internal Revenue Code of 1986, as amended, earned by the qualified community development entity since issuance of the qualified equity investment, prior to giving effect to any interest expense of long‑term debt securities designated as qualified equity investments and (ii) fifty percent (50%) of the purchase price of the qualified equity investments issued by the qualified community development entity.

(b)        To be decertified, all of the following conditions must be met:

(1)        The qualified equity investment is beyond its seventh reduction allowance date.

(2)        The qualified equity investment was in compliance with the requirements of this Article through its seventh reduction allowance date, including any cures.

(3)        The qualified equity investment has its proceeds invested in qualified active low‑income community investments such that the total qualified active low‑income community investments made, cumulatively including reinvestments, exceeds one hundred fifty percent (150%) of its qualified equity investment. For purposes of making this calculation, qualified low‑income community investments to any one qualified active low‑income community business, on a collective basis with affiliates, in excess of seven million dollars ($7,000,000) are not included unless the investments are made with capital returned or repaid from qualified low‑income community investments made by the qualified community development entity in other qualified active low‑income community businesses or interest earned on or profits realized from any qualified low‑income community investments.

(c)        A qualified community development entity that seeks to have a qualified equity investment decertified under this section shall send notice to the Department of its request for decertification along with evidence supporting the request. The provisions of subdivision (2) of subsection (b) of this section are met if no disallowance action has been commenced by the Department as of the seventh reduction allowance date. A request under this section shall not be unreasonably denied and shall be responded to within 30 days of receiving the request. If the request is denied for any reason, the burden of proof shall be on the Department in any administrative or legal proceeding that follows.

"§ 105‑129.108.  Limitation on fees.

No qualified community development entity shall be entitled to pay any affiliate of such qualified community development entity any fees in connection with any activity under this Article prior to decertification under G.S. 105‑129.107 of all qualified equity investments issued by the qualified community development entity. The foregoing shall not prohibit a qualified community development entity from allocating or distributing income earned by it to the affiliates or paying reasonable interest on amounts lent to the qualified community development entity by such affiliates.

"§ 105‑129.109.  Rural Investment Reserve.

(a)        Of the maximum total two hundred eight million three hundred thirty‑three thousand three hundred thirty‑three dollars ($208,333,333) of qualified equity investments eligible for certification by the Department under G.S. 105‑129.102, one hundred fifty‑six million two hundred fifty thousand dollars ($156,250,000) of the total shall be reserved for applications submitted for a portion of the New Markets Jobs Act of 2015 hereby designated the "Rural Reserve." The fifty‑two million eighty‑three thousand three hundred thirty‑three dollars ($52,083,333) not in the Rural Reserve shall be designated the "Statewide Reserve."

(b)        A qualified community development entity may apply for both the Rural Reserve and the Statewide Reserve, provided it does so in separate applications.

(c)        All qualified low‑income community investments made under the Rural Reserve of qualified equity investment authority shall only be made in qualified active low‑income community businesses located in rural census tracts in the State, including those necessary to meet the standards for decertification contained in G.S. 105‑129.107.

(d)        Qualified low‑income community investments made under the Statewide Reserve of qualified equity investment authority shall not be geographically restricted so long as the qualified active low‑income community business is located in the State.

"§ 105‑129.110.  New capital requirement.

No qualified active low‑income community business that receives a qualified low‑income community investment from a qualified community development entity that issues qualified equity investments under this Article, or any affiliates of such a qualified active low‑income community business, may directly or indirectly (i) own or have the right to acquire an ownership interest in a qualified community development entity or member or affiliate of a qualified community development entity, including, but not limited to, a holder of a qualified equity investment issued by the qualified community development entity, or (ii) loan to or invest in a qualified community development entity or member or affiliate of a qualified community development entity, including, but not limited to, a holder of a qualified equity investment issued by a qualified community development entity, where the proceeds of such loan or investment are directly or indirectly used to fund or refinance the purchase of a qualified equity investment hereunder. For purposes of this section, a qualified community development entity shall not be considered an affiliate of a qualified active low‑income community business solely as a result of its qualified low‑income community investment in such business.

"§ 105‑129.111.  Reporting.

(a)        A qualified community development entity that issues qualified equity investments shall submit a report to the Department within the first five business days after the first anniversary of the initial reduction allowance that provides documentation as to the investment of eighty‑five percent (85%) of the purchase price in qualified low‑income community investments in qualified active low‑income community businesses located in the State. The report shall include the following:

(1)        A bank statement of the qualified community development entity evidencing each qualified low‑income community investment.

(2)        Evidence that the business was a qualified active low‑income community business at the time of the qualified low‑income community investment.

(3)        Evidence that the qualified active low‑income community business was located in a rural census tract at the time of the qualified low‑income community investment, if applicable under the Rural Reserve.

(b)        After the initial report under subsection (a) of this section, a qualified community development entity shall submit an annual report to the Department on or before April 1 of the calendar year during the compliance period. An annual report is not due before the first anniversary of the initial reduction allowance date. The annual report shall include the following:

(1)        The number of employment positions created and retained as a result of qualified low‑income community investments.

(2)        The average annual salary of positions described in subdivision (1) of this subsection.

(3)        Certification from the qualified community development entity that the grounds for disallowance under G.S. 105‑129.102(e) have not occurred."

SECTION 2.(b)  This Part becomes effective July 1, 2015, and applies to qualified equity investments made on or after that date.

 

PART III.  MILL REHABILITATION TAX CREDIT

SECTION 3.(a)  Article 3H of Subchapter I of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal and reads as rewritten:

"Article 3H.

"Mill Rehabilitation Tax Credit.

"§ 105‑129.70.  Definitions.

The following definitions apply in this Article:

(1)        Certified historic structure. – Defined in section 47 of the Code.

(2)        Certified rehabilitation. – Defined in G.S. 105‑129.36.

(3)        Cost certification. – The certification obtained by the State Historic Preservation Officer from the taxpayer of the amount of the qualified rehabilitation expenditures or the rehabilitation expenses incurred with respect to a certified rehabilitation of an eligible site.

(3a)      Development tier area. – Defined in G.S. 143B‑437.08.

(4)        Eligibility certification. – The certification obtained from the State Historic Preservation Officer that the applicable facility comprises an eligible site.

(5)        Eligible site. – A site located in this State that satisfies all of the following conditions:

a.         It was used as a manufacturing facility or for purposes ancillary to manufacturing, as a warehouse for selling agricultural products, or as a public or private utility.

b.         It is a certified historic structure or a State‑certified historic structure.

c.         It has been at least eighty percent (80%) vacant for a period of at least two years immediately preceding the date the eligibility certification is made.

d.         Repealed by Session Laws 2008‑107, s. 28.4(a), effective for taxable years beginning on or after January 1, 2008.

(6)        Repealed by Session Laws 2006‑252, s. 2.22, effective January 1, 2007.

(7)        Pass‑through entity. – Defined in G.S. 105‑228.90.

(8)        Qualified rehabilitation expenditures. – Defined in section 47 of the Code.

(9)        Rehabilitation expenses. – Defined in G.S. 105‑129.36.

(10)      State‑certified historic structure. – Defined in G.S. 105‑129.36.

(11)      State Historic Preservation Officer. – Defined in G.S. 105‑129.36.

"§ 105‑129.71.  Credit for income‑producing rehabilitated mill property.

(a)        Credit. – A taxpayer who is allowed a credit under section 47 of the Code for making qualified rehabilitation expenditures of at least three million dollars ($3,000,000) with respect to a certified rehabilitation of an eligible site is allowed a credit equal to a percentage of the expenditures that qualify for the federal credit. The credit may be claimed in the year in which the eligible site is placed into service. When the eligible site is placed into service in two or more phases in different years, the amount of credit that may be claimed in a year is the amount based on the qualified rehabilitation expenditures associated with the phase placed into service during that year. In order to be eligible for a credit allowed by this Article, the taxpayer must provide to the Secretary a copy of the eligibility certification and the cost certification. The amount of the credit is as follows:

(1)        For an eligible site located in a development tier one or two area, determined as of the date of the eligibility certification, the amount of the credit is equal to forty percent (40%) of the qualified rehabilitation expenditures.

(2)        For an eligible site located in a development tier three area, determined as of the date of the eligibility certification, the amount of the credit is equal to thirty percent (30%) of the qualified rehabilitation expenditures.

(b)        Allocation. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the eligible site is placed in service, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.

(c)        Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under this section disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the eligible site is placed in service and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the eligible site was placed in service, the owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code.

(d)        Exceptions to Forfeiture. – Forfeiture as provided in subsection (c) of this section is not required if the change in ownership is the result of any of the following:

(1)        The death of the owner.

(2)        A merger, consolidation, or similar transaction requiring approval by the shareholders, partners, or members of the taxpayer under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.

(e)        Liability from Forfeiture. – A taxpayer or an owner of a pass‑through entity that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer or owner of a pass‑through entity that fails to pay the taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.

"§ 105‑129.72.  Credit for nonincome‑producing rehabilitated mill property.

(a)        Credit. – A taxpayer who is not allowed a federal income tax credit under section 47 of the Code and who makes rehabilitation expenses of at least three million dollars ($3,000,000) with respect to a certified rehabilitation of an eligible site is allowed a credit equal to a percentage of the rehabilitation expenses. The entire credit may not be taken for the taxable year in which the property is placed in service, but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. When the eligible site is placed into service in two or more phases in different years, the amount of credit that may be claimed in a year is the amount based on the rehabilitation expenses associated with the phase placed into service during that year. In order to be eligible for a credit allowed by this Article, the taxpayer must provide to the Secretary a copy of the eligibility certification and the cost certification. For an eligible site located in a development tier one or two area, determined as of the date of the eligibility certification, the amount of the credit is equal to forty percent (40%) of the rehabilitation expenses. No credit is allowed for a site located in a development tier three area.

(b)        Allocation. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the eligible site is placed in service, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.

(c)        Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under this section disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the eligible site is placed in service and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the eligible site was placed in service, the owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code. The remaining allocable credit is allocated equally among the five years in which the credit is claimed.

(d)        Exceptions to Forfeiture. – Forfeiture as provided in subsection (c) of this section is not required if the change in ownership is the result of any of the following:

(1)        The death of the owner.

(2)        A merger, consolidation, or similar transaction requiring approval by the shareholders, partners, or members of the taxpayer under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.

(e)        Liability from Forfeiture. – A taxpayer or an owner of a pass‑through entity that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer or owner of a pass‑through entity that fails to pay the taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.

"§ 105‑129.73.  Tax credited; cap.

(a)        Taxes Credited. – The credits allowed by this Article may be claimed against the franchise tax imposed under Article 3 of this Chapter, the income taxes imposed under Article 4 of this Chapter, or the gross premiums tax imposed under Article 8B of this Chapter. The taxpayer may take the credits allowed by this Article against only one of the taxes against which it is allowed. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which it is claimed. This election is binding. Any carryforwards of the credit must be claimed against the same tax.

(b)        Cap. – A credit allowed under this Article may not exceed the amount of the tax against which it is claimed for the taxable year reduced by the sum of all credits allowed, except payment of tax made by or on behalf of the taxpayer. Any unused portion of the credit may be carried forward for the succeeding nine years.

"§ 105‑129.74.  Coordination with Article 3D of this Chapter.

A taxpayer that claims a credit under this Article may not also claim a credit under Article 3D of this Chapter with respect to the same activity. The rules and fee schedule adopted under G.S. 105‑129.36A apply to this Article.

"§ 105‑129.75.  Sunset.

This Article expires January 1, 2015,2020, for rehabilitation projects for which an application for an eligibility certification is submitted on or after that date.

"§ 105‑129.75A.  Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took the credits allowed in this Article.

(2)        The amount of rehabilitation expenses and qualified rehabilitation expenditures with respect to which credits were taken.

(3)        The total cost to the General Fund of the credits taken."

SECTION 3.(b)  This act is effective when it becomes law, and applies to rehabilitation projects for which an application for eligibility certification is submitted on or after that date.

 

PART IV.  HISTORIC REHABILITATION TAX CREDITS

SECTION 4.(a)  Article 3H of Subchapter I of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal and reads as rewritten:

"Article 3D.

"Historic Rehabilitation Tax Credits.

"§ 105‑129.35.  Credit for rehabilitating income‑producing historic structure.

(a)        Credit. – A taxpayer who is allowed a federal income tax credit under section 47 of the Code for making qualified rehabilitation expenditures for a certified historic structure located in this State is allowed a credit equal to twenty percent (20%) of the expenditures that qualify for the federal credit. If the certified historic structure is a facility that at one time served as a State training school for juvenile offenders, the amount of the credit is equal to forty percent (40%) of the expenditures that qualify for the federal credit. To claim the credit allowed by this subsection, the taxpayer must provide a copy of the certification obtained from the State Historic Preservation Officer verifying that the historic structure has been rehabilitated in accordance with this subsection.

(b)        Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this section may allocate the credit among any of its owners in its discretion as long as an owner's adjusted basis in the pass‑through entity, as determined under the Code, at the end of the taxable year in which the certified historic structure is placed in service, is at least forty percent (40%) of the amount of credit allocated to that owner. Owners to whom a credit is allocated are allowed the credit as if they had qualified for the credit directly. A pass‑through entity and its owners must include with their tax returns for every taxable year in which an allocated credit is claimed a statement of the allocation made by the pass‑through entity and the allocation that would have been required under G.S. 105‑131.8 or G.S. 105‑269.15.

(c)        Definitions. – The following definitions apply in this section:

(1)        Certified historic structure. – Defined in section 47 of the Code.

(2)        Pass‑through entity. – Defined in G.S. 105‑228.90.

(3)        Qualified rehabilitation expenditures. – Defined in section 47 of the Code.

(4)        State Historic Preservation Officer. – Defined in G.S. 105‑129.36.

"§ 105‑129.36.  Credit for rehabilitating nonincome‑producing historic structure.

(a)        Credit. – A taxpayer who is not allowed a federal income tax credit under section 47 of the Code and who makes rehabilitation expenses for a State‑certified historic structure located in this State is allowed a credit equal to thirty percent (30%) of the rehabilitation expenses. If the certified historic structure is a facility that at one time served as a State training school for juvenile offenders, the amount of the credit is equal to forty percent (40%) of the expenditures that qualify for the federal credit. To qualify for the credit, the taxpayer's rehabilitation expenses must exceed twenty‑five thousand dollars ($25,000) within a 24‑month period. To claim the credit allowed by this subsection, the taxpayer must provide a copy of the certification obtained from the State Historic Preservation Officer verifying that the historic structure has been rehabilitated in accordance with this subsection.

(b)        Definitions. – The following definitions apply in this section:

(1)        Certified rehabilitation. – Repairs or alterations consistent with the Secretary of the Interior's Standards for Rehabilitation and certified as such by the State Historic Preservation Officer.

(2)        Rehabilitation expenses. – Expenses incurred in the certified rehabilitation of a certified historic structure and added to the property's basis.basis, if the expense is incurred for any of the following of the historic structure: (i) the exterior, (ii) the interior of a window sash if work is done to the exterior of the same window sash, (iii) structural elements, (iv) heating or ventilation systems, (v) electrical or plumbing systems, other than fixtures, or (vi) insulation. The term does not include the cost of acquiring the property, the cost attributable to the enlargement of an existing building, the cost of sitework expenditures, or the cost of personal property.property, or the cost of any interior repair not specifically listed in this subdivision.

(3)        State‑certified historic structure. – A structure that is individually listed in the National Register of Historic Places or is certified by the State Historic Preservation Officer as contributing to the historic significance of a National Register Historic District or a locally designated historic district certified by the United States Department of the Interior.

(4)        State Historic Preservation Officer. – The Deputy Secretary of Archives and History or the Deputy Secretary's designee who acts to administer the historic preservation programs within the State.

(c)        Recodified as G.S. 105‑129.36A by Session Laws 2003‑284, s. 35A.2, effective July 15, 2003.

"§ 105‑129.36A.  Rules; fees.

(a)        Rules. – The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt rules needed to administer the certification process required by this section.

(b)        Fees. – The North Carolina Historical Commission, in consultation with the State Historic Preservation Officer, may adopt a schedule of fees for providing certifications required by this Article. In establishing the fee schedule, the Commission shall consider the administrative and personnel costs incurred by the Department of Cultural Resources. An application fee may not exceed one percent (1%) of the completed qualifying rehabilitation expenditures. The proceeds of the fees are receipts of the Department of Cultural Resources and must be used for performing its duties under this Article.

"§ 105‑129.37.  Tax credited; credit limitations.

(a)        Tax Credited. – The credits provided in this Article are allowed against the income taxes levied in Article 4 of this Chapter.

(b)        Credit Limitations. – The entire credit may not be taken for the taxable year in which the property is placed in service but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. Any unused portion of the credit may be carried forward for the succeeding five years. A credit allowed under this Article may not exceed the amount of the tax against which it is claimed for the taxable year reduced by the sum of all credits allowed, except payments of tax made by or on behalf of the taxpayer.

(c)        Forfeiture for Disposition. – A taxpayer who is required under section 50 of the Code to recapture all or part of the federal credit for rehabilitating an income‑producing historic structure located in this State forfeits the corresponding part of the State credit allowed under G.S. 105‑129.35 with respect to that historic structure. If the credit was allocated among the owners of a pass‑through entity, the forfeiture applies to the owners in the same proportion that the credit was allocated.

(d)        Forfeiture for Change in Ownership. – If an owner of a pass‑through entity that has qualified for the credit allowed under G.S. 105‑129.35 disposes of all or a portion of the owner's interest in the pass‑through entity within five years from the date the rehabilitated historic structure is placed in service and the owner's interest in the pass‑through entity is reduced to less than two‑thirds of the owner's interest in the pass‑through entity at the time the historic structure was placed in service, the owner forfeits a portion of the credit. The amount forfeited is determined by multiplying the amount of credit by the percentage reduction in ownership and then multiplying that product by the forfeiture percentage. The forfeiture percentage equals the recapture percentage found in the table in section 50(a)(1)(B) of the Code. The remaining allowable credit is allocated equally among the five years in which the credit is claimed.

(e)        Exceptions to Forfeiture. – Forfeiture as provided in subsection (d) of this section is not required if the change in ownership is the result of any of the following:

(1)        The death of the owner.

(2)        A merger, consolidation, or similar transaction requiring approval by the shareholders, partners, or members of the taxpayer under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, consolidation, or other similar transaction.

(f)         Liability From Forfeiture. – A taxpayer or an owner of a pass‑through entity that forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited. A taxpayer or owner of a pass‑through entity that fails to pay the taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.

"§ 105‑129.38.  Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took the credits allowed in this Article.

(2)        The amount of rehabilitation expenses and qualified rehabilitation expenditures with respect to which credits were taken.

(3)        The total cost to the General Fund of the credits taken.

"§ 105‑129.39.  Sunset.

This Article expires for qualified rehabilitation expenditures and rehabilitation expenses incurred on or after January 1, 2015.2020."

SECTION 4.(b)  This Part is effective when it becomes law and applies to qualified rehabilitation expenditures and rehabilitation expenses incurred on or after that date.

 

PART V.  FILM CREDIT

SECTION 5.(a)  G.S. 105‑151.29 is reenacted as it existed immediately before its repeal and reads as rewritten:

"§ 105‑151.29.  Credit for qualifying expenses of a production company.

(a)        Definitions. – The following definitions apply in this section:

(1)        Highly compensated individual. – An individual who directly or indirectly receives compensation in excess of one million dollars ($1,000,000) for personal services with respect to a single production. An individual receives compensation indirectly when a production company pays a personal service company or an employee leasing company that pays the individual.

(2)        Live sporting event. – A scheduled sporting competition, game, or race that is not originated by a production company, but originated solely by an amateur, collegiate, or professional organization, institution, or association for live or tape‑delayed television or satellite broadcast. A live sporting event does not include commercial advertising, an episodic television series, a television pilot, a music video, a motion picture, or a documentary production in which sporting events are presented through archived historical footage or similar footage taken at least 30 days before it is used.

(3)        Production company. – Defined in G.S. 105‑164.3.

(4)        Qualifying expenses. – The sum of the following amounts spent in this State by a production company in connection with a production, less the amount paid in excess of one million dollars ($1,000,000) to a highly compensated individual:

a.         Goods and services leased or purchased. For goods with a purchase price of twenty‑five thousand dollars ($25,000) or more, the amount included in qualifying expenses is the purchase price less the fair market value of the good at the time the production is completed.

b.         Compensation and wages on which withholding payments are remitted to the Department of Revenue under Article 4A of this Chapter.

c.         The cost of production‑related insurance coverage obtained on the production. Expenses for insurance coverage purchased from a related member are not qualifying expenses.

d.         Employee fringe contributions, including health, pension, and welfare contributions.

e.         Per diems, stipends, and living allowances paid for work being performed in this State.

(5)        Related member. – Defined in G.S. 105‑130.7A.

(b)        Credit. – A taxpayer that is a production company and has qualifying expenses of at least two hundred fifty thousand dollars ($250,000) with respect to a production is allowed a credit against the taxes imposed by this Part equal to twenty‑five percent (25%) of the production company's qualifying expenses. For the purposes of this section, in the case of an episodic television series, an entire season of episodes is one production. The credit is computed based on all of the taxpayer's qualifying expenses incurred with respect to the production, not just the qualifying expenses incurred during the taxable year.

(b1)      Repealed by Session Laws 2009‑529, s. 2, effective January 1, 2011.

(c)        Pass‑Through Entity. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for a credit provided in this section does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming a credit allowed by this section. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, a credit allowed under this section does not affect the entity's payment of tax on behalf of its owners.

(d)        Return. – A taxpayer may claim a credit allowed by this section on a return filed for the taxable year in which the production activities are completed. The return must state the name of the production, a description of the production, and a detailed accounting of the qualifying expenses with respect to which a credit is claimed. The qualifying expenses are subject to audit by the Secretary before the credit is allowed.

(e)        Credit Refundable. – If a credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.

(f)         Limitations. – The amount of credit allowed under this section with respect to a production that is a feature film may not exceed twenty million dollars ($20,000,000). No credit is allowed under this section for any production that satisfies one of the following conditions:

(1)        It is political advertising.

(2)        It is a television production of a news program or live sporting event.

(3)        It contains material that is obscene, as defined in G.S. 14‑190.1.

(4)        It is a radio production.

(g)        Substantiation. – A taxpayer allowed a credit under this section must maintain and make available for inspection any information or records required by the Secretary of Revenue. The taxpayer has the burden of proving eligibility for a credit and the amount of the credit. The Secretary may consult with the North Carolina Film Office of the Department of Commerce and the regional film commissions in order to determine the amount of qualifying expenses.

(h)        Report. – The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The location of sites used in a production for which a credit was taken.

(2)        The qualifying expenses for which a credit was taken, classified by whether the expenses were for goods, services, or compensation paid by the production company.

(3)        The number of people employed in the State with respect to credits taken.

(4)        The total cost to the General Fund of the credits taken.

(i)         Repealed by Session Laws 2006‑220, s. 4, effective for taxable years beginning on and after January 1, 2007.

(j)         NC Film Office. – To claim a credit under this section, a taxpayer must notify the Division of Tourism, Film, and Sports Development in the Department of Commerce of the taxpayer's intent to claim the production tax credit. The notification must include the title of the production, the name of the production company, a financial contact for the production company, the proposed dates on which the production company plans to begin filming the production, and any other information required by the Division. For productions that have production credits, a taxpayer claiming a credit under this section must acknowledge in the production credits both the North Carolina Film Office and the regional film office responsible for the geographic area in which the filming of the production occurred.

(k)        Sunset. – This section is repealed for qualifying expenses occurring on or after January 1, 2015.2020."

SECTION 5.(b)  G.S. 105‑130.47 is reenacted as it existed immediately before its repeal and reads as rewritten:

"§ 105‑130.47.  Credit for qualifying expenses of a production company.

(a)        Definitions. – The following definitions apply in this section:

(1)        Highly compensated individual. – An individual who directly or indirectly receives compensation in excess of one million dollars ($1,000,000) for personal services with respect to a single production. An individual receives compensation indirectly when a production company pays a personal service company or an employee leasing company that pays the individual.

(2)        Live sporting event. – A scheduled sporting competition, game, or race that is not originated by a production company, but originated solely by an amateur, collegiate, or professional organization, institution, or association for live or tape‑delayed television or satellite broadcast. A live sporting event does not include commercial advertising, an episodic television series, a television pilot, a music video, a motion picture, or a documentary production in which sporting events are presented through archived historical footage or similar footage taken at least 30 days before it is used.

(3)        Production company. – Defined in G.S. 105‑164.3.

(4)        Qualifying expenses. – The sum of the following amounts spent in this State by a production company in connection with a production, less the amount in excess of one million dollars ($1,000,000) paid to a highly compensated individual:

a.         Goods and services leased or purchased. For goods with a purchase price of twenty‑five thousand dollars ($25,000) or more, the amount included in qualifying expenses is the purchase price less the fair market value of the good at the time the production is completed.

b.         Compensation and wages on which withholding payments are remitted to the Department of Revenue under Article 4A of this Chapter.

c.         The cost of production‑related insurance coverage obtained on the production. Expenses for insurance coverage purchased from a related member are not qualifying expenses.

d.         Employee fringe contributions, including health, pension, and welfare contributions.

e.         Per diems, stipends, and living allowances paid for work being performed in this State.

(5)        Related member. – Defined in G.S. 105‑130.7A.

(b)        Credit. – A taxpayer that is a production company and has qualifying expenses of at least two hundred fifty thousand dollars ($250,000) with respect to a production is allowed a credit against the taxes imposed by this Part equal to twenty‑five percent (25%) of the production company's qualifying expenses. For the purposes of this section, in the case of an episodic television series, an entire season of episodes is one production. The credit is computed based on all of the taxpayer's qualifying expenses incurred with respect to the production, not just the qualifying expenses incurred during the taxable year.

(b1)      Repealed by Session Laws 2009‑529, s. 1, effective January 1, 2011.

(c)        Pass‑Through Entity. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for a credit provided in this section does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming a credit allowed by this section. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, a credit allowed under this section does not affect the entity's payment of tax on behalf of its owners.

(d)        Return. – A taxpayer may claim a credit allowed by this section on a return filed for the taxable year in which the production activities are completed. The return must state the name of the production, a description of the production, and a detailed accounting of the qualifying expenses with respect to which a credit is claimed. The qualifying expenses are subject to audit by the Secretary before the credit is allowed.

(e)        Credit Refundable. – If a credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.

(f)         Limitations. – The amount of credit allowed under this section with respect to a production that is a feature film may not exceed twenty million dollars ($20,000,000). No credit is allowed under this section for any production that satisfies one of the following conditions:

(1)        It is political advertising.

(2)        It is a television production of a news program or live sporting event.

(3)        It contains material that is obscene, as defined in G.S. 14‑190.1.

(4)        It is a radio production.

(g)        Substantiation. – A taxpayer allowed a credit under this section must maintain and make available for inspection any information or records required by the Secretary of Revenue. The taxpayer has the burden of proving eligibility for a credit and the amount of the credit. The Secretary may consult with the North Carolina Film Office of the Department of Commerce and the regional film commissions in order to determine the amount of qualifying expenses.

(h)        Report. – The Department must include in the economic incentives report required by G.S. 105‑256 the following information, itemized by taxpayer:

(1)        The location of sites used in a production for which a credit was taken.

(2)        The qualifying expenses for which a credit was taken, classified by whether the expenses were for goods, services, or compensation paid by the production company.

(3)        The number of people employed in the State with respect to credits taken.

(4)        The total cost to the General Fund of the credits taken.

(i)         Repealed by Session Laws 2006‑220, s. 2, effective for taxable years beginning on or after January 1, 2007.

(j)         NC Film Office. – To claim a credit under this section, a taxpayer must notify the Division of Tourism, Film, and Sports Development in the Department of Commerce of the taxpayer's intent to claim the production tax credit. The notification must include the title of the production, the name of the production company, a financial contact for the production company, the proposed dates on which the production company plans to begin filming the production, and any other information required by the Division. For productions that have production credits, a taxpayer claiming a credit under this section must acknowledge in the production credits both the North Carolina Film Office and the regional film office responsible for the geographic area in which the filming of the production occurred.

(k)        Sunset. – This section is repealed for qualifying expenses occurring on or after January 1, 2015.2020."

SECTION 5.(c)  This Part is effective for taxable years beginning on or after January 1, 2015, and applies to qualifying expenses occurring on or after that date.

 

PART VI.  LOW‑INCOME HOUSING TAX CREDITS

SECTION 6.(a)  Article 3H of Subchapter I of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal and reads as rewritten:

"Article 3E.

"Low‑Income Housing Tax Credits.

"§ 105‑129.40.  Scope and definitions.

(a)        Scope. – G.S. 105‑129.41 applies to buildings that are awarded a federal credit allocation before January 1, 2003. G.S. 105‑129.42 applies to buildings that are awarded a federal credit allocation on or after January 1, 2003.

(b)        Definitions. – The definitions in section 42 of the Code and the following definitions apply in this Article:

(1)        Housing Finance Agency. – The North Carolina Housing Finance Agency established in G.S. 122A‑4.

(2)        Pass‑through entity. – Defined in G.S. 105‑228.90.

…

"§ 105‑129.42.  Credit for low‑income housing awarded a federal credit allocation on or after January 1, 2003.

(a)        Definitions. – The following definitions apply in this section:

(1)        Qualified Allocation Plan. – The plan governing the allocation of federal low‑income housing tax credits for a particular year, as approved by the Governor after a public hearing and publication in the North Carolina Register.

(2)        Qualified North Carolina low‑income housing development. – A qualified low‑income project or building that is allocated a federal tax credit under section 42(h)(1) of the Code and is described in subsection (c) of this section.

(3)        Qualified residential unit. – A housing unit that meets the requirements of section 42 of the Code.

(b)        Credit. – A taxpayer who is allocated a federal low‑income housing tax credit under section 42 of the Code to construct or substantially rehabilitate a qualified North Carolina low‑income housing development is allowed a credit equal to a percentage of the development's qualified basis, as determined pursuant to section 42 of the Code. For the purpose of this section, qualified basis is calculated based on the information contained in the carryover allocation and is not recalculated to reflect subsequent increases or decreases. No credit is allowed for a development that uses tax‑exempt bond financing.

(c)        Developments and Amounts. – The following table sets out the housing developments that are qualified North Carolina low‑income housing developments and are allowed a credit under this section. The table also sets out the percentage of the development's qualified basis for which a credit is allowed. The designation of a county or city as Low Income, Moderate Income, or High Income and determinations of affordability are made by the Housing Finance Agency in accordance with the Qualified Allocation Plan in effect as of the time the federal credit is allocated. A change in the income designation of a county or city after a federal credit is allocated does not affect the percentage of the developer's qualified basis for which a credit is allowed. The affordability requirements set out in the chart apply for the duration of the federal tax credit compliance period. If in any year a taxpayer fails to meet these affordability requirements, the credit is forfeited under subsection  (h) of this section.

                                                                                                                       Percentage of

                                                                                                                           Basis for

                       Type of Development                                                                Which Credit

                                                                                                                         is Allowed

Forty percent (40%) of the qualified residential units

are affordable to households whose income is fifty                                            Thirty percent

percent (50%) or less of area median income and the                                             (30%)

units are in a Low‑Income county or city.

 

Fifty percent (50%) of the qualified residential units

are affordable to households whose income is fifty                                          Twenty percent

percent (50%) or less of the area median income and                                             (20%)

the units are in a Moderate‑Income county or city.

 

Fifty percent (50%) of the qualified residential units

are affordable to households whose income is forty                                            Ten percent

percent (40%) or less of the area median income and                                             (10%)

the units are in a High‑Income county or city.

 

Twenty‑five percent (25%) of the qualified residential

units are affordable to households whose income is                                            Ten percent

thirty percent (30%) or less of the area median income                                           (10%)

and the units are in a High‑Income county or city.

 

(d)        Election. – When a taxpayer to whom a federal low‑income housing credit is allocated submits to the Housing Finance Agency a request to receive a carryover allocation for that credit, the taxpayer must elect a method for receiving the tax credit allowed by this section. A taxpayer may elect to receive the credit in the form of either a direct tax refund or a loan generated by transferring the credit to the Housing Finance Agency. Neither a direct tax refund nor a loan received as the result of the transfer of the credit is considered taxable income under this Chapter.

Under the direct tax refund method, a taxpayer elects to apply the credit allowed by this section to the taxpayer's liability under Article 4 of this Chapter. If the credit allowed by this section exceeds the amount of tax imposed by Article 4 for the taxable year, reduced by the sum of all other credits allowable, the Secretary must refund the excess. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before this credit. The provisions that apply to an overpayment of tax apply to the refundable excess of a credit allowed under this section.

Under the loan method, a taxpayer elects to transfer the credit allowed by this section to the Housing Finance Agency and receive a loan from that Agency for the amount of the credit. The terms of the loan are specified by the Housing Finance Agency in accordance with the Qualified Allocation Plan.

(e)        Exception When No Carryover. – If a taxpayer does not submit to the Housing Finance Agency a request to receive a carryover allocation, the taxpayer must elect the method for receiving the credit allowed by this section when the taxpayer submits to the Agency federal Form 8609. A taxpayer to whom this subsection applies claims the credit for the taxable year in which the taxpayer submits federal Form 8609.

(f)         Pass‑Through Entity. – Notwithstanding the provisions of G.S. 105‑131.8 and G.S. 105‑269.15, a pass‑through entity that qualifies for the credit provided in this Article does not distribute the credit among any of its owners. The pass‑through entity is considered the taxpayer for purposes of claiming the credit allowed by this Article. If a return filed by a pass‑through entity indicates that the entity is paying tax on behalf of the owners of the entity, the credit allowed under this Article does not affect the entity's payment of tax on behalf of its owners.

(g)        Return and Payment. – A taxpayer may claim the credit allowed by this section on a return filed for the taxable year in which the taxpayer receives a carryover allocation of a federal low‑income housing credit. The return must state the name and location of the qualified low‑income housing development for which the credit is claimed.

If a taxpayer chooses the loan method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the amount of credit allowed the taxpayer. The Agency must loan the taxpayer the amount of the credit on terms consistent with the Qualified Allocation Plan. The Housing Finance Agency is not required to make a loan to a qualified North Carolina low‑income housing development until the Secretary transfers the credit amount to the Agency.

If the taxpayer chooses the direct tax refund method for receiving the credit allowed under this section, the Secretary must transfer to the Housing Finance Agency the refundable excess of the credit allowed the taxpayer. The Agency holds the refund due the taxpayer in escrow, with no interest accruing to the taxpayer during the escrow period. The Agency must release the refund to the taxpayer upon the occurrence of the earlier of the following:

(1)        The Agency determines that the taxpayer has complied with the Qualified Allocation Plan and has completed at least fifty percent (50%) of the activities included in the development's qualified basis.

(2)        Within 30 days after the date the development is placed in service.

(h)        Forfeiture. – A taxpayer that receives a credit under this section must immediately report any recapture event under section 42 of the Code to the Housing Finance Agency. If the taxpayer or any of its owners are required under section 42(j) of the Code to recapture all or part of a federal credit with respect to a qualified North Carolina low‑income development, the taxpayer forfeits the corresponding part of the credit allowed under this section. This requirement does not apply in the following circumstances:

(1)        When the recapture of part or all of the federal credit is the result of an event that occurs in the sixth or a subsequent calendar year after the calendar year in which the development was awarded a federal credit allocation.

(2)        The taxpayer elected to transfer the credit allowed by this section to the Housing Finance Agency.

(i)         Liability From Forfeiture. – A taxpayer that forfeits all or part of the credit allowed under this section is liable for all past taxes avoided and any refund claimed as a result of the credit plus interest at the rate established under G.S. 105‑241.21. The interest is computed from the date the Secretary transferred the credit amount to the Housing Finance Agency. The past taxes, refund, and interest are due 30 days after the date the credit is forfeited. A taxpayer that fails to pay the taxes, refund, and interest by the due date is subject to the penalties provided in G.S. 105‑236.

"§ 105‑129.43.  Substantiation.

A taxpayer allowed a credit under this Article must maintain and make available for inspection any information or records required by the Secretary of Revenue or the Housing Finance Agency. The burden of proving eligibility for a credit and the amount of the credit rests upon the taxpayer.

"§ 105‑129.44.  Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took the credit allowed in this Article.

(2)        The location of each qualified North Carolina low‑income building or housing development for which a credit was taken.

(3)        The total cost to the General Fund of the credits taken.

"§ 105‑129.45.  Sunset.

This Article is repealed effective January 1, 2015.2020. The repeal applies to developments to which federal credits are allocated on or after January 1, 2015.2020."

SECTION 6.(b)  This Part is effective when it becomes law and applies to developments to which federal credits are allocated on or after that date.

 

PART VII.  RENEWABLE ENERGY PROPERTY

SECTION 7.(a)  G.S. 105‑129.16A reads as rewritten:

"§ 105‑129.16A.  Credit for investing in renewable energy property.

(a)        Credit. – If a taxpayer that has constructed, purchased, or leased renewable energy property places it in service in this State during the taxable year, the taxpayer is allowed a credit equal to thirty‑five percent (35%) of the cost of the property. In the case of renewable energy property that serves a nonbusiness purpose, the credit must be taken for the taxable year in which the property is placed in service. For all other renewable energy property, the entire credit may not be taken for the taxable year in which the property is placed in service but must be taken in five equal installments beginning with the taxable year in which the property is placed in service. Upon request of a taxpayer that leases renewable energy property, the lessor of the property must give the taxpayer a statement that describes the renewable energy property and states the cost of the property. No credit is allowed under this section to the extent the cost of the renewable energy property was provided by public funds. For the purposes of this section, "public funds" does not include grants made under section 1603 of the American Recovery and Reinvestment Tax Act of 2009.

(b)        Expiration. – If, in one of the years in which the installment of a credit accrues, the renewable energy property with respect to which the credit was claimed is disposed of, taken out of service, or moved out of State, the credit expires and the taxpayer may not take any remaining installment of the credit. The taxpayer may, however, take the portion of an installment that accrued in a previous year and was carried forward to the extent permitted under G.S. 105‑129.17.

(c)        Ceilings. – The credit allowed by this section may not exceed the applicable ceilings provided in this subsection.

(1)        Business. – A ceiling of two million five hundred thousand dollars ($2,500,000) applies to each installation of renewable energy property placed in service for a business purpose. Renewable energy property is placed in service for a business purpose if the useful energy generated by the property is offered for sale or is used on‑site for a purpose other than providing energy to a residence.

(2)        Nonbusiness. – The following ceilings apply to renewable energy property placed in service for a nonbusiness purpose:

a.         One thousand four hundred dollars ($1,400) per dwelling unit for solar energy equipment for domestic water heating, including pool heating.

b.         Three thousand five hundred dollars ($3,500) per dwelling unit for solar energy equipment for active space heating, combined active space and domestic hot water systems, and passive space heating.

c.         Eight thousand four hundred dollars ($8,400) for each installation of geothermal equipment.

d.         Ten thousand five hundred dollars ($10,500) for each installation of any other renewable energy property.

(3)        Eco‑Industrial Park. – A ceiling of five million dollars ($5,000,000) applies to each installation of renewable energy property placed in service at an Eco‑Industrial Park certified under G.S. 143B‑437.08 for a business purpose described in subdivision (1) of this subsection.

(d)        No Double Credit. – A taxpayer that claims any other credit allowed under this Chapter with respect to renewable energy property may not take the credit allowed in this section with respect to the same property. A taxpayer may not take the credit allowed in this section for renewable energy property the taxpayer leases from another unless the taxpayer obtains the lessor's written certification that the lessor will not claim a credit under this Chapter with respect to the property.

(e)        Sunset. – This section is repealed effective for renewable energy property placed into service on or after January 1, 2016.2020."

SECTION 7.(b)  This Part is effective when it becomes law.

 

PART VIII.  USE OF NORTH CAROLINA PORTS CREDIT

SECTION 8.(a)  G.S. 105‑130.41 is reenacted as it existed immediately before its repeal and reads as rewritten:

"§ 105‑130.41.  Credit for North Carolina State Ports Authority wharfage, handling, and throughput charges.

(a)        Credit. – A taxpayer whose waterborne cargo is loaded onto or unloaded from an ocean carrier calling at the State‑owned port terminal at Wilmington or Morehead City, without consideration of the terms under which the cargo is moved, is allowed a credit against the tax imposed by this Part. The amount of credit allowed is equal to the excess of the wharfage, handling (in or out), and throughput charges assessed on the cargo for the current taxable year over an amount equal to the average of the charges for the current taxable year and the two preceding taxable years. The credit applies to forest products, break‑bulk cargo and container cargo, including less‑than‑container‑load cargo, that is loaded onto or unloaded from an ocean carrier calling at either the Wilmington or Morehead City port terminal and to bulk cargo that is loaded onto or unloaded from an ocean carrier calling at the Morehead City port terminal. To obtain the credit, taxpayers must provide to the Secretary a statement from the State Ports Authority certifying the amount of charges for which a credit is claimed and any other information required by the Secretary.

(b)        Limitations. – This credit may not exceed fifty percent (50%) of the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, except tax payments made by or on behalf of the corporation. Any unused portion of the credit may be carried forward for the succeeding five years. The maximum cumulative credit that may be claimed by a corporation under this section is two million dollars ($2,000,000).

(c)        Definitions. – For purposes of this section, the terms "handling" (in or out) and "wharfage" have the meanings provided in the State Ports Tariff Publications, "Wilmington Tariff, Terminal Tariff #6," and "Morehead City Tariff, Terminal Tariff #1." For purposes of this section, the term "throughput" has the same meaning as "wharfage" but applies only to bulk products, both dry and liquid.

(c1)      Report. – The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers taking a credit allowed in this section.

(2)        The total amount of charges assessed for the taxable year.

(2a)      The amount of the charges attributable to imports.

(2b)      The amount of the charges attributable to exports.

(3)        The total cost to the General Fund of the credits taken.

(d)        Sunset. – This section is repealed effective for taxable years beginning on or after January 1, 2014.2020."

SECTION 8.(b)  This Part is effective for taxable years beginning on or after January 1, 2015.

 

PART IX.  QUALIFIED BUSINESS INVESTMENTS

SECTION 9.(a)  Part 5 of Article 4 of Subchapter I of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal and reads as rewritten:

"Part 5. Tax Credits for Qualified Business Investments.

"§ 105‑163.010.  Definitions.

The following definitions apply in this Part:

(1)        Affiliate. – An individual or business that controls, is controlled by, or is under common control with another individual or business.

(2)        Business. – A corporation, partnership, limited liability company, association, or sole proprietorship operated for profit.

(3)        Control. – A person controls an entity if the person owns, directly or indirectly, more than ten percent (10%) of the voting securities of that entity. As used in this subdivision, the term "voting security" means a security that (i) confers upon the holder the right to vote for the election of members of the board of directors or similar governing body of the business or (ii) is convertible into, or entitles the holder to receive upon its exercise, a security that confers such a right to vote. A general partnership interest is a voting security.

(4)        Equity security. – Common stock, preferred stock, or an interest in a partnership, or subordinated debt that is convertible into, or entitles the holder to receive upon its exercise, common stock, preferred stock, or an interest in a partnership.

(5)        Financial institution. – A business that is (i) a bank holding company, as defined in the Bank Holding Company Act of 1956, 12 U.S.C. §§ 1841, et seq., or its wholly owned subsidiary, (ii) registered as a broker‑dealer under the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a, et seq., or its wholly owned subsidiary, (iii) an investment company as defined in the Investment Company Act of 1940, 15 U.S.C. §§ 80a‑1, et seq., whether or not it is required to register under that act, (iv) a small business investment company as defined in the Small Business Investment Act of 1958, 15 U.S.C. §§ 661, et seq., (v) a pension or profit‑sharing fund or trust, or (vi) a bank, savings institution, trust company, financial services company, or insurance company. The term does not include, however, a business, other than a small business investment company, whose net worth, when added to the net worth of all of its affiliates, is less than ten million dollars ($10,000,000). The term also does not include a business that does not generally market its services to the public and is controlled by a business that is not a financial institution.

(5a)      Granting entity. – Any of the following:

a.         A domestic or foreign corporation that (i) is tax‑exempt pursuant to section 501(c)(3) of the Code, (ii) has as its principal purpose the stimulation of the development of the biotechnology industry, and (iii) in furtherance of that purpose has received, or is a successor in interest to an organization that has received, direct appropriations from the State in at least three fiscal years.

b.         A domestic or foreign corporation that meets the following three conditions:

1.         It is tax‑exempt pursuant to section 501(c)(3) of the Code, is a private foundation pursuant to section 509 of the Code, or is an affiliate of either of the foregoing.

2.         It has as its principal purpose one of the following: conducting research and development in, or stimulating the development of, electronic, photonic, information, or other technologies, which may include investing in companies that provide research, development, products, or services in these technologies.

3.         It meets one of the following conditions:

I.          It received direct appropriations in furtherance of one of these purposes from the State in at least three fiscal years.

II.         It was organized to perform one of these purposes for an organization that meets condition I of this sub‑subdivision.

III.       It is an affiliate of an entity that meets condition II of this sub‑subdivision.

c.         An institute that (i) is administratively located within a constituent institution of The University of North Carolina, (ii) is financed in part by a domestic or foreign corporation that is tax‑exempt pursuant to section 501(c)(3) of the Code, (iii) has as a principal purpose the stimulation of economic development based on the advancement of science, engineering, and technology, and (iv) funds, either directly or in collaboration with other entities, small businesses engaging in developing technology.

(6)        North Carolina Enterprise Corporation. – A corporation established in accordance with Article 3 of Chapter 53A of the General Statutes or a limited partnership in which a North Carolina Enterprise Corporation is the only general partner.

(7)        Pass‑through entity. – Defined in G.S. 105‑228.90.

(7b)      Qualified business. – A qualified business venture, a qualified grantee business, or a qualified licensee business.

(8)        Qualified business venture. – A business that (i) engages primarily in manufacturing, processing, warehousing, wholesaling, research and development, or a service‑related industry, and (ii) is registered with the Secretary of State under G.S. 105‑163.013.

(9)        Qualified grantee business. – A business that (i) is registered with the Secretary of State under G.S. 105‑163.013, and (ii) has received during the current year or any of the preceding three years a grant, an investment, or other funding from a federal agency under the Small Business Innovation Research Program administered by the United States Small Business Administration or from a granting entity as defined in this section.

(9a)      Qualified licensee business. – A business that meets all of the following conditions:

a.         It is registered with the Secretary of State under G.S. 105‑163.013.

b.         During its most recent fiscal year before filing an application for registration under G.S. 105‑163.013, it had gross revenues, as determined in accordance with generally accepted accounting principles, of one million dollars ($1,000,000) or less on a consolidated basis.

c.         It has been certified by a constituent institution of The University of North Carolina or a research university as currently performing under a licensing agreement with the institution or university for the purpose of commercializing technology developed at the institution or university. For the purpose of this section, a research university is an institution of higher education classified as a Doctoral/Research University, Extensive or Intensive, in the most recent edition of "A Classification of Institutions of Higher Education", the official report of The Carnegie Foundation for the Advancement of Teaching.

(10)      Real estate‑related business. – A business that is involved in or related to the brokerage, selling, purchasing, leasing, operating, or managing of hotels, motels, nursing homes or other lodging facilities, golf courses, sports or social clubs, restaurants, storage facilities, or commercial or residential lots or buildings is a real estate‑related business, except that a real estate‑related business does not include (i) a business that purchases or leases real estate from others for the purpose of providing itself with facilities from which to conduct a business that is not itself a real estate‑related business or (ii) a business that is not otherwise a real estate‑related business but that leases, subleases, or otherwise provides to one or more other persons a number of square feet of space which in the aggregate does not exceed fifty percent (50%) of the number of square feet of space occupied by the business for its other activities.

(10a)    Related person. – A person described in one of the relationships set forth in section 267(b) or 707(b) of the Code.

(11)      Security. – A security as defined in Section 2(1) of the Securities Act of 1933, 15 U.S.C. § 77b(1).

(12)      Selling or leasing at retail. – A business is selling or leasing at retail if the business either (i) sells or leases any product or service of any nature from a store or other location open to the public generally or (ii) sells or leases products or services of any nature by means other than to or through one or more other businesses.

(13)      Service‑related industry. – A business is engaged in a service‑related industry, whether or not it also sells a product, if it provides services to customers or clients and does not as a substantial part of its business engage in a business described in G.S. 105‑163.013(b)(4). A business is engaged as a substantial part of its business in an activity described in G.S. 105‑163.013(b)(4) if (i) its gross revenues derived from all activities described in that subdivision exceed twenty‑five percent (25%) of its gross revenues in any fiscal year or (ii) it is established as one of its primary purposes to engage in any activities described in that subdivision, whether or not its purposes were stated in its articles of incorporation or similar organization documents.

(14)      Subordinated debt. – Indebtedness that is not secured and is subordinated to all other indebtedness of the issuer issued or to be issued to a financial institution other than a financial institution described in subdivisions (5)(ii) through (5)(v) of this section. Except as provided in G.S. 105‑163.014(d1), any portion of indebtedness that matures earlier than five years after its issuance is not subordinated debt.

"§ 105‑163.011.  Tax credits allowed.

(a)        No Credit for Brokered Investments. – No credit is allowed under this section for a purchase of equity securities or subordinated debt if a broker's fee or commission or other similar remuneration is paid or given directly or indirectly for soliciting the purchase.

(b)        Individuals. – Subject to the limitations contained in G.S. 105‑163.012, an individual who purchases the equity securities or subordinated debt of a qualified business directly from that business is allowed as a credit against the tax imposed by Part 2 of this Article for the taxable year an amount equal to twenty‑five percent (25%) of the amount invested. The aggregate amount of credit allowed an individual for one or more investments made in a single taxable year under this Part, whether directly or indirectly as owner of a pass‑through entity, may not exceed fifty thousand dollars ($50,000). The credit may not be taken for the year in which the investment is made but may be taken for the taxable year beginning during the calendar year in which the application for the credit becomes effective as provided in subsection (c) of this section.

(b1)      Pass‑Through Entities. – This subsection does not apply to a pass‑through entity that has committed capital under management in excess of five million dollars ($5,000,000) or to a pass‑through entity that is a qualified business or a North Carolina Enterprise Corporation. Subject to the limitations provided in G.S. 105‑163.012, a pass‑through entity that purchases the equity securities or subordinated debt of a qualified business directly from the business is eligible for a tax credit equal to twenty‑five percent (25%) of the amount invested. The aggregate amount of credit allowed a pass‑through entity for one or more investments made in a single taxable year under this Part, whether directly or indirectly as owner of another pass‑through entity, may not exceed seven hundred fifty thousand dollars ($750,000). The pass‑through entity is not eligible for the credit for the year in which the investment by the pass‑through entity is made but is eligible for the credit for the taxable year beginning during the calendar year in which the application for the credit becomes effective as provided in subsection (c) of this section.

Each individual who is an owner of a pass‑through entity is allowed as a credit against the tax imposed by Part 2 of this Article for the taxable year an amount equal to the owner's allocated share of the credits for which the pass‑through entity is eligible under this subsection. The aggregate amount of credit allowed an individual for one or more investments made in a single taxable year under this Part, whether directly or indirectly as owner of a pass‑through entity, may not exceed fifty thousand dollars ($50,000).

If an owner's share of the pass‑through entity's credit is limited due to the maximum allowable credit under this section for a taxable year, the pass‑through entity and its owners may not reallocate the unused credit among the other owners.

(c)        Application. – To be eligible for the tax credit provided in this section, the taxpayer must file an application for the credit with the Secretary. The application should be filed on or before April 15 of the year following the calendar year in which the investment was made. The Secretary may not accept an application filed after October 15 of the year following the calendar year in which the investment was made. An application is effective for the year in which it is timely filed. The application must be on a form prescribed by the Secretary and must include any supporting documentation that the Secretary may require. If an investment for which a credit is applied for was paid for other than in money, the taxpayer must include with the application a certified appraisal of the value of the property used to pay for the investment. The application for a credit for an investment made by a pass‑through entity must be filed by the pass‑through entity.

(d)        Penalties. – The penalties provided in G.S. 105‑236 apply in this Part.

"§ 105‑163.012.  Limit; carry‑over; ceiling; reduction in basis.

(a)        The credit allowed a taxpayer under G.S. 105‑163.011 may not exceed the amount of income tax imposed by Part 2 of this Article for the taxable year reduced by the sum of all other credits allowable except tax payments made by or on behalf of the taxpayer. The amount of unused credit allowed under G.S. 105‑163.011 may be carried forward for the next five succeeding years.

(b)        The total amount of all tax credits allowed to taxpayers under G.S. 105‑163.011 for investments made in a calendar year may not exceed seven million five hundred thousand dollars ($7,500,000). The Secretary of Revenue shall calculate the total amount of tax credits claimed from the applications filed pursuant to G.S. 105‑163.011(c). If the total amount of tax credits claimed for investments made in a calendar year exceeds this maximum amount, the Secretary shall allow a portion of the credits claimed by allocating the maximum amount in tax credits in proportion to the size of the credit claimed by each taxpayer.

(c)        If a credit claimed under G.S. 105‑163.011 is reduced as provided in this section, the Secretary shall notify the taxpayer of the amount of the reduction of the credit on or before December 31 of the year following the calendar year in which the investment was made. The Secretary's allocations based on applications filed pursuant to G.S. 105‑163.011(c) are final and shall not be adjusted to account for credits applied for but not claimed.

(d)        The taxpayer's basis in the equity securities or subordinated debt acquired as a result of an investment in a qualified business shall be reduced for the purposes of this Article by the amount of allowable credit. "Allowable credit" means the amount of credit allowed under G.S. 105‑163.011 reduced as provided in subsection (c) of this section.

"§ 105‑163.013.  Registration.

(a)        Repealed by Session Laws 1993, c. 443, s. 4.

(b)        Qualified Business Ventures. – In order to qualify as a qualified business venture under this Part, a business must be registered with the Securities Division of the Department of the Secretary of State. To register, the business must file with the Secretary of State an application and any supporting documents the Secretary of State may require from time to time to determine that the business meets the requirements for registration as a qualified business venture. A business meets the requirements for registration as a qualified business venture if all of the following are true as of the date the business files the required application:

(1)        Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7.

(1a)      Reserved for future codification purposes.

(1b)      Either (i) it was organized after January 1 of the calendar year in which its application is filed or (ii) during its most recent fiscal year before filing the application, it had gross revenues, as determined in accordance with generally accepted accounting principles, of five million dollars ($5,000,000) or less on a consolidated basis.

(2)        Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7.

(3)        It is organized to engage primarily in manufacturing, processing, warehousing, wholesaling, research and development, or a service‑related industry.

(4)        It does not engage as a substantial part of its business in any of the following:

a.         Providing a professional service as defined in Chapter 55B of the General Statutes.

b.         Construction or contracting.

c.         Selling or leasing at retail.

d.         The purchase, sale, or development, or purchasing, selling, or holding for investment of commercial paper, notes, other indebtedness, financial instruments, securities, or real property, or otherwise make investments.

e.         Providing personal grooming or cosmetics services.

f.          Offering any form of entertainment, amusement, recreation, or athletic or fitness activity for which an admission or a membership is charged.

(5)        It was not formed for the primary purpose of acquiring all or part of the stock or assets of one or more existing businesses.

(6)        It is not a real estate‑related business.

The effective date of registration for a qualified business venture whose application is accepted for registration is 60 days before the date its application is filed. No credit is allowed under this Part for an investment made before the effective date of the registration or after the registration is revoked. For the purpose of this Article, if a taxpayer's investment is placed initially in escrow conditioned upon other investors' commitment of additional funds, the date of the investment is the date escrowed funds are transferred to the qualified business venture free of the condition.

To remain qualified as a qualified business venture, the business must renew its registration annually as prescribed by rule by filing a financial statement for the most recent fiscal year showing gross revenues, as determined in accordance with generally accepted accounting principles, of five million dollars ($5,000,000) or less on a consolidated basis and an application for renewal in which the business certifies the facts required in the original application.

Failure of a qualified business venture to renew its registration by the applicable deadline shall result in revocation of its registration effective as of the next day after the renewal deadline, but shall not result in forfeiture of tax credits previously allowed to taxpayers who invested in the business except as provided in G.S. 105‑163.014. The Secretary of State shall send the qualified business venture notice of revocation within 60 days after the renewal deadline. A qualified business venture may apply to have its registration reinstated by the Secretary of State by filing an application for reinstatement, accompanied by the reinstatement application fee and a late filing penalty of one thousand dollars ($1,000), within 30 days after receipt of the revocation notice from the Secretary of State. A business that seeks approval of a new application for registration after its registration has been revoked must also pay a penalty of one thousand dollars ($1,000). A registration that has been reinstated is treated as if it had not been revoked.

If the gross revenues of a qualified business venture exceed five million dollars ($5,000,000) in a fiscal year, the business must notify the Secretary of State in writing of this fact by filing a financial statement showing the revenues of the business for that year.

(b1)      Qualified Licensee Businesses. – In order to qualify as a qualified licensee business under this Part, a business must be registered with the Securities Division of the Department of the Secretary of State. To register, the business must file with the Secretary of State an application and any supporting documents the Secretary of State may require from time to time to determine that the business meets the requirements for registration as a qualified licensee business. The requirements for registration as a qualified licensee business are set out in G.S. 105‑163.010.

The effective date of registration for a qualified licensee business whose application is accepted for registration is the filing date of its application. No credit is allowed under this Part for an investment made before the effective date of the registration or after the registration is revoked.

To remain qualified as a qualified licensee business, the business must renew its registration annually as prescribed by rule by filing a financial statement for the most recent fiscal year showing gross revenues, as determined in accordance with generally accepted accounting principles, of one million dollars ($1,000,000) or less on a consolidated basis and an application for renewal in which the business certifies the facts required in the original application.

Failure of a qualified licensee venture to renew its registration by the applicable deadline results in revocation of its registration effective as of the next day after the renewal deadline, but does not result in forfeiture of tax credits previously allowed to taxpayers who invested in the business except as provided in G.S. 105‑163.014. The Secretary of State shall send the qualified licensee business notice of revocation within 60 days after the renewal deadline. A qualified licensee business may apply to have its registration reinstated by the Secretary of State by filing an application for reinstatement, accompanied by the reinstatement application fee and a late filing penalty of one thousand dollars ($1,000), within 30 days after receipt of the revocation notice from the Secretary of State. A business that seeks approval of a new application for registration after its registration has been revoked must also pay a penalty of one thousand dollars ($1,000). A registration that has been reinstated is treated as if it had not been revoked.

If the gross revenues of a qualified business venture exceed one million dollars ($1,000,000) in a fiscal year, the business must notify the Secretary of State in writing of this fact by filing a financial statement showing the revenues of the business for that year.

(c)        Qualified Grantee Businesses. – In order to qualify as a qualified grantee business under this Part, a business must be registered with the Securities Division of the Department of the Secretary of State. To register, the business must file with the Secretary of State an application and any supporting documents the Secretary of State may require from time to time to determine that the business meets the requirements for registration as a qualified grantee business. The requirements for registration as a qualified grantee business are set out in G.S. 105‑163.010.

The effective date of registration for a qualified grantee business whose application is accepted for registration is the filing date of its application. No credit is allowed under this Part for an investment made before the effective date of the registration or after the registration is revoked.

To remain qualified as a qualified grantee business, the business must renew its registration annually as prescribed by rule by filing an application for renewal in which the business certifies the facts demonstrating that it continues to meet the applicable requirements for qualification.

(d)        Application Forms; Rules; Fees. – Applications for registration, renewal of registration, and reinstatement of registration under this section shall be in the form required by the Secretary of State. The Secretary of State may, by rule, require applicants to furnish supporting information in addition to the information required by subsections (b), (b1), and (c) of this section. The Secretary of State may adopt rules in accordance with Chapter 150B of the General Statutes that are needed to carry out the Secretary's responsibilities under this Part. The Secretary of State shall prepare blank forms for the applications and shall distribute them throughout the State and furnish them on request. Each application shall be signed by the owners of the business or, in the case of a corporation, by its president, vice‑president, treasurer, or secretary. There shall be annexed to the application the affirmation of the person making the application in the following form: "Under penalties prescribed by law, I certify and affirm that to the best of my knowledge and belief this application is true and complete." A person who submits a false application is guilty of a Class 1 misdemeanor.

The fee for filing an application for registration under this section is one hundred dollars ($100.00). The fee for filing an application for renewal of registration under this section is fifty dollars ($50.00). The fee for filing an application for reinstatement of registration under this section is fifty dollars ($50.00).

An application for renewal of registration under this section must indicate whether the applicant is a minority business, as defined in G.S. 143‑128, and include a report of the number of jobs the business created during the preceding year that are attributable to investments that qualify under this section for a tax credit and the average wages paid by each job. An application that does not contain this information is incomplete and the applicant's registration may not be renewed until the information is provided.

(e)        Revocation of Registration. – If the Securities Division of the Department of the Secretary of State finds that any of the information contained in an application of a business registered under this section is false, it shall revoke the registration of the business. The Secretary of State shall not revoke the registration of a business solely because it ceases business operations for an indefinite period of time, as long as the business renews its registration each year as required under this section.

(f)         Transfer of Registration. – A registration as a qualified business may not be sold or otherwise transferred, except that if a qualified business enters into a merger, conversion, consolidation, or other similar transaction with another business and the surviving company would otherwise meet the criteria for being a qualified business, the surviving company retains the registration without further application to the Secretary of State. In such a case, the qualified business must provide the Secretary of State with written notice of the merger, conversion, consolidation, or similar transaction and the name, address, and jurisdiction of incorporation or organization of the surviving company.

(g)        Report by Secretary of State. – The Secretary of State shall report to the Revenue Laws Study Committee by October 1 of each year all of the businesses that have registered with the Secretary of State as qualified business ventures, qualified licensee businesses, and qualified grantee businesses. The report shall include the name and address of each business, the location of its headquarters and principal place of business, a detailed description of the types of business in which it engages, whether the business is a minority business as defined in G.S. 143‑128, the number of jobs created by the business during the period covered by the report, and the average wages paid by these jobs.

"§ 105‑163.014.  Forfeiture of credit.

(a)        Participation in Business. – A taxpayer who has received a credit under this Part for an investment in a qualified business forfeits the credit if, within three years after the investment was made, the taxpayer participates in the operation of the qualified business. For the purpose of this section, a taxpayer participates in the operation of a qualified business if the taxpayer, the taxpayer's spouse, parent, sibling, or child, or an employee of any of these individuals or of a business controlled by any of these individuals, provides services of any nature to the qualified business for compensation, whether as an employee, a contractor, or otherwise. However, a person who provides services to a qualified business, whether as an officer, a member of the board of directors, or otherwise does not participate in its operation if the person receives as compensation only reasonable reimbursement of expenses incurred in providing the services, participation in a stock option or stock bonus plan, or both.

(b)        False Application. – A taxpayer who has received a credit under this Part for an investment in a qualified business forfeits the credit if the registration of the qualified business is revoked because information in the registration application was false at the time the application was filed with the Secretary of State.

(c)        Repealed by Session Laws 1996, Second Extra Session, c. 14, s. 7.

(d)        Transfer or Redemption of Investment. – A taxpayer who has received a credit under this Part for an investment in a qualified business forfeits the credit in the following cases:

(1)        Within one year after the investment was made, the taxpayer transfers any of the securities received in the investment that qualified for the tax credit to another person or entity, other than in a transfer resulting from one of the following:

a.         The death of the taxpayer.

b.         A final distribution in liquidation to the owners of a taxpayer that is a corporation or other entity.

c.         A merger, conversion, consolidation, or similar transaction requiring approval by the owners of the qualified business under applicable State law, to the extent the taxpayer does not receive cash or tangible property in the merger, conversion, consolidation, or other similar transaction.

(2)        Except as provided in subsection (d1) of this section, within five years after the investment was made, the qualified business in which the investment was made makes a redemption with respect to the securities received in the investment.

In the event the taxpayer transfers fewer than all the securities in a manner that would result in a forfeiture, the amount of the credit that is forfeited is the product obtained by multiplying the aggregate credit attributable to the investment by a fraction whose numerator equals the number of securities transferred and whose denominator equals the number of securities received on account of the investment to which the credit was attributable. In addition, if the redemption amount is less than the amount invested by the taxpayer in the securities to which the redemption is attributable, the amount of the credit that is forfeited is further reduced by multiplying it by a fraction whose numerator equals the redemption amount and whose denominator equals the aggregate amount invested by the taxpayer in the securities involved in the redemption. The term "redemption amount" means all amounts paid that are treated as a distribution in part or full payment in exchange for securities under section 302(a) of the Code.

(d1)      Certain Redemptions Allowed. – Forfeiture of a credit does not occur under this section if a qualified business venture that engages primarily in motion picture film production makes a redemption with respect to securities received in an investment and the following conditions are met:

(1)        The redemption occurred because the qualified business venture completed production of a film, sold the film, and was liquidated.

(2)        Neither the qualified business venture nor a related person continues to engage in business with respect to the film produced by the qualified business venture.

(e)        Effect of Forfeiture. – A taxpayer who forfeits a credit under this section is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105‑241.21, computed from the date the taxes would have been due if the credit had not been allowed. The past taxes and interest are due 30 days after the date the credit is forfeited; a taxpayer who fails to pay the past taxes and interest by the due date is subject to the penalties provided in G.S. 105‑236.

"§ 105‑163.015.  Sunset.

This Part is repealed effective for investments made on or after January 1, 2014.2020."

SECTION 9.(b)  This Part is effective for taxable years beginning on or after January 1, 2015.

 

PART X.  JOB DEVELOPMENT INVESTMENT GRANT PROGRAM

SECTION 10.(a)  Part 2G of Article 10 of Chapter 143B of the General Statutes reads as rewritten:

"Part 2G. Job Development Investment Grant Program.

"§ 143B‑437.50.  Legislative findings and purpose.

The General Assembly finds that:

(1)        It is the policy of the State of North Carolina to stimulate economic activity and to create new jobs for the citizens of the State by encouraging and promoting the expansion of existing business and industry within the State and by recruiting and attracting new business and industry to the State.

(2)        Both short‑term and long‑term economic trends at the State, national, and international levels have made the successful implementation of the State's economic development policy and programs both more critical and more challenging; and the decline in the State's traditional industries, and the resulting adverse impact upon the State and its citizens, have been exacerbated in recent years by adverse national and State economic trends that contribute to the reduction in the State's industrial base and that inhibit the State's ability to sustain or attract new and expanding businesses.

(3)        The economic condition of the State is not static and recent changes in the State's economic condition have created economic distress that requires a reevaluation of certain existing State programs and the enactment of a new program as provided in this Part that are designed to stimulate new economic activity and to create new jobs within the State.

(4)        The enactment of this Part is necessary to stimulate the economy, facilitate economic recovery, and create new jobs in North Carolina; and this Part will promote the general welfare and confer, as its primary purpose and effect, benefits on citizens throughout the State through the creation of new jobs, an enlargement of the overall tax base, an expansion and diversification of the State's industrial base, and an increase in revenue to the State and its political subdivisions.

(5)        The purpose of this Part is to stimulate economic activity and to create new jobs within the State.

(6)        It is not the intent of the General Assembly that grants provided through this Part be used as venture capital funds, business incubator funds, or business start‑up funds or to otherwise fund the initial capitalization needs of new businesses.

(7)        Nothing in this Part shall be construed to constitute a guarantee or assumption by the State of any debt of any business or to authorize the taxing power or the full faith and credit of the State to be pledged.

"§ 143B‑437.51.  Definitions.

The following definitions apply in this Part:

(1)        Agreement. – A community economic development agreement under G.S. 143B‑437.57.

(2)        Base period. – The period of time set by the Committee during which new employees are to be hired for the positions on which the grant is based.

(3)        Business. – A corporation, sole proprietorship, cooperative association, partnership, S corporation, limited liability company, nonprofit corporation, or other form of business organization, located either within or outside this State.

(4)        Committee. – The Economic Investment Committee established pursuant to G.S. 143B‑437.54.

(4a)      Development tier. – The classification assigned to an area pursuant to G.S. 143B‑437.08.

(5)        Eligible position. – A position created by a business and filled by a new full‑time employee in this State during the base period.

(6)        Full‑time employee. – A person who is employed for consideration for at least 35 hours a week, whose wages are subject to withholding under Article 4A of Chapter 105 of the General Statutes, and who is determined by the Committee to be employed in a permanent position according to criteria it develops in consultation with the Attorney General. The term does not include any person who works as an independent contractor or on a consulting basis for the business.

(7)        New employee. – A full‑time employee who represents a net increase in the number of the business's employees statewide.

(8)        Overdue tax debt. – Defined in G.S. 105‑243.1.

(9)        Related member. – Defined in G.S. 105‑130.7A.

(10)      Withholdings. – The amount withheld by a business from the wages of employees in eligible positions under Article 4A of Chapter 105 of the General Statutes.

"§ 143B‑437.52.  Job Development Investment Grant Program.

(a)        Program. – There is established the Job Development Investment Grant Program to be administered by the Economic Investment Committee. In order to foster job creation and investment in the economy of this State, the Committee may enter into agreements with businesses to provide grants in accordance with the provisions of this Part. The Committee, in consultation with the Attorney General, shall develop criteria to be used in determining whether the conditions of this section are satisfied and whether the project described in the application is otherwise consistent with the purposes of this Part. Before entering into an agreement, the Committee must find that all the following conditions are met:

(1)        The project proposed by the business will create, during the term of the agreement, a net increase in employment in this State by the business.

(2)        The project will benefit the people of this State by increasing opportunities for employment and by strengthening this State's economy by, for example, providing worker training opportunities, constructing and enhancing critical infrastructure, increasing development in strategically important industries, or increasing the State and local tax base.

(3)        The project is consistent with economic development goals for the State and for the area where it will be located.

(4)        A grant under this Part is necessary for the completion of the project in this State.

(5)        The total benefits of the project to the State outweigh its costs and render the grant appropriate for the project.

(b)        Priority. – In selecting between applicants, a project that is located in an Eco‑Industrial Park certified under G.S. 143B‑437.08 has priority over a comparable project that is not located in a certified Eco‑Industrial Park.

(c)        Awards. – The maximum amount of total annual liability for grants awarded in any single calendar year under this Part, including amounts transferred to the Utility Account pursuant to G.S. 143B‑437.61, is fifteen million dollars ($15,000,000). No agreement may be entered into that, when considered together with other existing agreements governing grants awarded during a single calendar year, could cause the State's potential total annual liability for grants awarded in a single calendar year to exceed this amount. The Department shall make every effort to ensure that the average percentage of withholdings of eligible positions for grants awarded under this Part does not exceed the average of the range provided in G.S. 143B‑437.56(a).

(d)        Measuring Employment. – For the purposes of subdivision (a)(1) of this section and G.S. 143B‑437.51(5), 143B‑437.51(7), and 143B‑437.57(a)(11), the Committee may designate that the increase or maintenance of employment is measured at the level of a division or another operating unit of a business, rather than at the business level, if both of the following conditions are met:

(1)        The Committee makes an explicit finding that the designation is necessary to secure the project in this State.

(2)        The agreement contains terms to ensure that the business does not create eligible positions by transferring or shifting to the project existing positions from another project of the business or a related member of the business.

"§ 143B‑437.53.  Eligible projects.

(a)        Minimum Number of Eligible Positions. – A business may apply to the Committee for a grant for any project that creates the minimum number of eligible positions as set out in the table below. If the project will be located in more than one development tier area, the location with the highest development tier area designation determines the minimum number of eligible positions that must be created.

Development Tier Area                                    Number of Eligible Positions

Tier One                                                                         10

Tier Two                                                                        20

Tier Three                                                                       20

(b)        Ineligible Businesses. – A project that consists solely of retail facilities is not eligible for a grant under this Part. If a project consists of both retail facilities and nonretail facilities, only the portion of the project consisting of nonretail facilities is eligible for a grant, and only the withholdings from employees in eligible positions that are employed exclusively in the portion of the project that represents nonretail facilities may be used to determine the amount of the grant. If a warehouse facility is part of a retail facility and supplies only that retail facility, the warehouse facility is not eligible for a grant. For the purposes of this Part, catalog distribution centers are not retail facilities.

A project that consists of a professional or semiprofessional sports team or club, other than a professional motorsports racing team, is not eligible for a grant under this Part.

(c)        Health Insurance. – A business is eligible for a grant under this Part only if the business provides health insurance for all of the applicable full‑time employees of the project with respect to which the grant is made. For the purposes of this subsection, an applicable full‑time employee is one who earns from the business less than one hundred fifty thousand dollars ($150,000) in taxable compensation on an annualized basis or three and one‑half times the annualized average State wage for all insured private employers in the State employing between 250 and 1,000 employees, whichever is greater. For the purposes of this subsection, a business provides health insurance if it pays at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. 58‑50‑125.

Each year that a business receives a grant under this Part, the business must provide with the submission required under G.S. 143B‑437.58 a certification that the business continues to provide health insurance, as required by this subsection, for all applicable full‑time employees of the project with respect to which the grant is made. If the business ceases to provide the required health insurance, the Committee shall amend or terminate the agreement as provided in G.S. 143B‑437.59.

(d)        Repealed by Session Laws 2003‑435, 2nd Ex. Sess., s. 2.3, effective December 16, 2003.

(e)        Safety and Health Programs. – In order for a business to be eligible for a grant under this Part, the business must have no citations under the Occupational Safety and Health Act that have become a final order within the past three years for willful serious violations or for failing to abate serious violations with respect to the location for which the grant is made. For the purposes of this subsection, "serious violation" has the same meaning as in G.S. 95‑127.

"§ 143B‑437.54.  Economic Investment Committee established.

(a)        Membership. – The Economic Investment Committee is established. The Committee consists of the following members:

(1)        The Secretary of Commerce.

(2)        The Secretary of Revenue.

(3)        The Director of the Office of State Budget and Management.

(4)        One member appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives.

(5)        One member appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate.

The members of the Committee appointed by the General Assembly may not be members of the General Assembly. The members of the Committee appointed by the General Assembly serve two‑year terms that begin upon appointment.

(b)        Decision Required. – The Committee may act only upon a decision of three of its five members.

(c)        Conflict of Interest. – It is unlawful for a current or former member of the Committee to, while serving on the Committee or within two years after the end of service on the Committee, provide services for compensation, as an employee, consultant, or otherwise, to any business or a related member of the business that is awarded a grant under this Part or under G.S. 143B‑437.02 while the member is serving on the Committee. Violation of this subsection is a Class 1 misdemeanor. In addition to the penalties imposed under G.S. 15A‑1340.23, the court shall also make a finding as to what compensation was received by the defendant for services in violation of this section and shall order the defendant to forfeit that compensation.

If a person is convicted under this section, the person shall not provide services for compensation, as an employee, consultant, or otherwise, to any business or a related member of the business that was awarded a grant under this Part or under G.S. 143B‑437.02 while the member was serving on the Committee until two years after the person's conviction under this section.

(d)        Public Notice. – At least 20 days before the effective date of any criteria or nontechnical amendments to criteria, the Committee must publish the proposed criteria on the Department of Commerce's web site and provide notice to persons who have requested notice of proposed criteria. In addition, the Committee must accept oral and written comments on the proposed criteria during the 15 business days beginning on the first day that the Committee has completed these notifications. For the purpose of this subsection, a technical amendment is either of the following:

(1)        An amendment that corrects a spelling or grammatical error.

(2)        An amendment that makes a clarification based on public comment and could have been anticipated by the public notice that immediately preceded the public comment.

(e)        Sunshine. – Meetings of the Committee are subject to the open meetings requirements of Article 33C of Chapter 143 of the General Statutes. All documents of the Committee, including applications for grants, are public records governed by Chapter 132 of the General Statutes and any applicable provisions of the General Statutes protecting confidential information.

"§ 143B‑437.55.  Applications; fees; reports; study.

(a)        Application. – A business shall apply, under oath, to the Committee for a grant on a form prescribed by the Committee that includes at least all of the following:

(1)        The name of the business, the proposed location of the project, and the type of activity in which the business will engage at the project site or sites.

(2)        The names and addresses of the principals or management of the business, the nature of the business, and the form of business organization under which it is operated.

(3)        The financial statements of the business prepared by a certified public accountant and any other financial information the Committee considers necessary.

(4)        The number of eligible positions proposed to be created for the project and the salaries for these positions.

(5)        An estimate of the total withholdings.

(6)        Certification that the business will provide health insurance to full‑time employees of the project as required by G.S. 143B‑437.53(c).

(7)        Information concerning other locations, including locations in other states and countries, being considered for the project and the nature of any benefits that would accrue to the business if the project were to be located in one of those locations.

(8)        Information concerning any other State or local government incentives for which the business is applying or that it has an expectation of receiving.

(9)        Any other information necessary for the Committee to evaluate the application.

A business may apply, in one consolidated application in a form and manner determined by the Committee, for a grant that may include performance by related members of the business who may qualify under this Part.

The Committee will consider an application by a business for a grant that includes performance of its related members only if the related members for whom the application is submitted assign to the business any claim of right the related members may have under this Part to apply for grants individually during the term of the agreement and agree to cooperate with the business in providing to the Committee all the information required for the initial application and the agreement, and any other information the Committee may require for the purposes of this Part. The applicant business is responsible for providing to the Committee all the information required under this Part.

If a business applies for a grant that includes performance by its related members, the related members included in the application may be permitted to meet the qualifications for a grant collectively by participating in a project that meets the requirements of this Part. The amount of a grant may be calculated under the terms of this Part as if the related members were all collectively one business entity. Any conditions for a grant, other than the number of eligible positions created, apply to each related member who is listed in the application as participating in the project. The grant awarded shall be paid to the approved grantee business only. A grant received under this Part by a business may be apportioned to the related members in a manner determined by the business. In order for an agreement to be executed, each related member included in the application must sign the agreement and agree to abide by its terms.

(b)        Application Fee. – When filing an application under this section, the business must pay the Committee a fee of ten thousand dollars ($10,000). The fee is due at the time the application is filed. The Secretary of Commerce, the Secretary of Revenue, and the Director of the Office of State Budget and Management shall determine the allocation of the fee imposed by this section among their agencies. The proceeds of the fee are receipts of the agency to which they are credited. Within 30 days of receipt of an application under this section but prior to any award being made, the Department of Commerce shall notify each governing body of an area where a submitted application proposes locating a project of the information listed in this subsection, provided that the governing body agrees, in writing, to any confidentiality requirements imposed by the Department under G.S. 132‑6(d). The information required by this subsection includes all of the following:

(1)        The estimated amount of the grant anticipated to be awarded to the applicant for the project.

(2)        Any economic impact data submitted with the application or prepared by the Department.

(3)        Any economic impact estimated by the Department to result from the project.

(c)        Annual Reports. – The Committee shall publish a report on the Job Development Investment Grant Program on or before April 30 of each year. The Committee shall submit the report electronically to the House of Representatives Finance Committee, the Senate Finance Committee, the House of Representatives Appropriations Subcommittee on Natural and Economic Resources, the Senate Appropriations Committee on Natural and Economic Resources, and the Fiscal Research Division. The report shall include the following:

(1)        A listing of each grant awarded during the preceding calendar year, including the name of the business, the cost/benefit analysis conducted by the Committee during the application process, a description of the project, the term of the grant, the percentage of withholdings used to determine the amount of the grant, the annual maximum State liability under the grant, and the maximum total lifetime State liability under the grant.

(2)        An update on the status of projects under grants awarded before the preceding calendar year.

(3)        The number and development tier area of eligible positions to be created by projects with respect to which grants have been awarded.

(3a)      A listing of the employment level for all businesses receiving a grant and any changes in those levels from the level of the next preceding year.

(4)        The wage levels of all eligible positions to be created by projects with respect to which grants have been awarded, aggregated and listed in increments of ten thousand dollars ($10,000) or other appropriate increments.

(5)        The amount of new income tax revenue received from withholdings related to the projects for which grants have been awarded.

(6)        For the first annual report after adoption of the criteria developed by the Committee, in consultation with the Attorney General, to implement this Part, a copy of such criteria, and, for subsequent reports, identification of any changes in those criteria from the previous calendar year.

(7)        The number of awards made to new businesses and the number of awards made to existing, expanding businesses in the preceding calendar year.

(8)        The environmental impact of businesses that have received grants under the program.

(9)        The geographic distribution of grants, by number and amount, awarded under the program.

(10)      Repealed by Session Laws 2009‑394, s. 2, effective July 31, 2009.

(11)      A listing of all businesses making an application under this Part and an explanation of whether each business ultimately located the project in this State regardless of whether the business was awarded a grant for the project under this Part.

(12)      Repealed by Session Laws 2006‑168, s. 1.4, effective July 27, 2006.

(13)      The total amount transferred to the Utility Account under this Part during the preceding year.

(d)        Repealed by Session Laws 2012‑142, s. 13.4(f), effective July 1, 2012.

(e)        Study. – The Committee shall conduct a study to determine the minimum funding level required to implement the Job Development Investment Grant Program successfully. The Committee shall report the results of this study to the House of Representatives Finance Committee, the Senate Finance Committee, the House of Representatives Appropriations Subcommittee on Natural and Economic Resources, the Senate Appropriations Committee on Natural and Economic Resources, and the Fiscal Research Division no later than April 1 of each year.

"§ 143B‑437.56.  Calculation of minimum and maximum grants; factors considered.

(a)        Subject to the limitations of subsection (d) of this section, the amount of the grant awarded in each case shall be a percentage of the withholdings of eligible positions. The percentage shall be no less than ten percent (10%) and no more than seventy‑five percent (75%) of the withholdings of the eligible positions for a period of years. The percentage used to determine the amount of the grant shall be based on criteria developed by the Committee, in consultation with the Attorney General, after considering at least the following:

(1)        The number of eligible positions to be created.

(2)        The expected duration of those positions.

(3)        The type of contribution the business can make to the long‑term growth of the State's economy.

(4)        The amount of other financial assistance the project will receive from the State or local governments.

(5)        The total dollar investment the business is making in the project.

(6)        Whether the project utilizes existing infrastructure and resources in the community.

(7)        Whether the project is located in a development zone.

(8)        The number of eligible positions that would be filled by residents of a development zone.

(9)        The extent to which the project will mitigate unemployment in the State and locality.

(b)        The term of the grant shall not exceed 12 years starting with the first year a grant payment is made. The first grant payment must be made within six years after the date on which the grant was awarded. The number of years in the base period for which grant payments may be made shall not exceed five years.

(c)        The grant may be based only on eligible positions created during the base period.

(d)        For any eligible position that is located in a development tier three area, seventy‑five percent (75%) of the annual grant approved for disbursement shall be payable to the business, and twenty‑five percent (25%) shall be payable to the Utility Account pursuant to G.S. 143B‑437.61. For any eligible position that is located in a development tier two area, eighty‑five percent (85%) of the annual grant approved for disbursement shall be payable to the business, and fifteen percent (15%) shall be payable to the Utility Account pursuant to G.S. 143B‑437.61. A position is located in the development tier area that has been assigned to the county in which the project is located at the time the application is filed with the Committee.

(e)        A business that is receiving any other grant by operation of State law may not receive an amount as a grant pursuant to this Part that, when combined with any other grants, exceeds seventy‑five percent (75%) of the withholdings of the business, unless the Committee makes an explicit finding that the additional grant is necessary to secure the project.

(f)         The amount of a grant associated with any specific eligible position, including any amount transferred to the Utility Account pursuant to G.S. 143B‑437.61, may not exceed six thousand five hundred dollars ($6,500) in any year.

"§ 143B‑437.57.  Community economic development agreement.

(a)        Terms. – Each community economic development agreement shall include at least the following:

(1)        A detailed description of the proposed project that will result in job creation and the number of new employees to be hired during the base period.

(2)        The term of the grant and the criteria used to determine the first year for which the grant may be claimed.

(3)        The number of eligible positions that are subjects of the grant and a description of those positions and the location of those positions.

(4)        The amount of the grant based on a percentage of withholdings.

(5)        A method for determining the number of new employees hired during a grant year.

(6)        A method for the business to report annually to the Committee the number of eligible positions for which the grant is to be made.

(7)        A requirement that the business report to the Committee annually the aggregate amount of withholdings during the grant year.

(8)        A provision permitting an audit of the payroll records of the business by the Committee from time to time as the Committee considers necessary.

(9)        A provision that requires the Committee to reduce the amount or term of a grant pursuant to G.S. 143B‑437.59.

(10)      A provision that requires the business to maintain operations at the project location or another location approved by the Committee for at least one hundred fifty percent (150%) of the term of the grant and a provision to permit the Committee to recapture all or part of the grant at its discretion if the business does not remain at the site for the required term.

(11)      A provision that requires the business to maintain employment levels in this State at the level of the year immediately preceding the base period.

(12)      A provision establishing the conditions under which the grant agreement may be terminated, in addition to those under G.S. 143B‑437.59, and under which grant funds may be recaptured by the Committee.

(13)      A provision stating that unless the agreement is terminated pursuant to G.S. 143B‑437.59, the agreement, including any amendments pursuant to G.S. 143B‑437.59, is binding and constitutes a continuing contractual obligation of the State and the business.

(14)      A provision setting out any allowed variation in the terms of the agreement that will not subject the business to grant reduction, amendment, or termination of the agreement under G.S. 143B‑437.59.

(15)      A provision that prohibits the business from manipulating or attempting to manipulate employee withholdings with the purpose of increasing the amount of the grant and that requires the Committee to terminate the agreement and take action to recapture grant funds if the Committee finds that the business has manipulated or attempted to manipulate withholdings with the purpose of increasing the amount of the grant.

(16)      A provision requiring that the business engage in fair employment practices as required by State and federal law and a provision encouraging the business to use small contractors, minority contractors, physically handicapped contractors, and women contractors whenever practicable in the conduct of its business.

(17)      A provision encouraging the business to hire North Carolina residents.

(18)      A provision encouraging the business to use the North Carolina State Ports.

(19)      A provision stating that the State is not obligated to make any annual grant payment unless and until the State has received withholdings from the business in an amount that exceeds the amount of the grant payment.

(20)      A provision describing the manner in which the amount of a grant will be measured and administered to ensure compliance with the provisions of G.S. 143B‑437.52(c).

(21)      A provision stating that any recapture of a grant and any reduction in the amount of the grant or the term of the agreement must, at a minimum, be proportional to the failure to comply measured relative to the condition or criterion with respect to which the failure occurred.

(22)      A provision stating that any disputes over interpretation of the agreement shall be submitted to binding arbitration.

(23)      A provision stating that the amount of a grant associated with any specific eligible position, including any amount transferred to the Utility Account pursuant to G.S. 143B‑437.61, may not exceed six thousand five hundred dollars ($6,500) in any year.

(24)      A provision stating that the business agrees to submit to an audit at any time that the Committee requires one.

(25)      A provision encouraging the business to contract with small businesses headquartered in the State for goods and services.

(b)        Approval of Attorney General. – The Attorney General shall review the terms of all proposed agreements entered into by the Committee. To be effective against the State, an agreement entered into under this Part must be signed personally by the Attorney General.

(c)        Agreement Binding. – A community economic development agreement is a binding obligation of the State and is not subject to State funds being appropriated by the General Assembly.

"§ 143B‑437.58.  Grant recipient to submit records.

(a)        No later than March 1 of each year, for the preceding grant year, every business that is awarded a grant under this Part shall submit to the Committee an annual payroll report showing withholdings as a condition of its continuation in the grant program and identifying eligible positions that have been created during the base period that remain filled at the end of each year of the grant. Annual reports submitted to the Committee shall include social security numbers of individual employees identified in the reports. Upon request of the Committee, the business shall also submit a copy of its State and federal tax returns. Payroll and tax information, including social security numbers of individual employees and State and federal tax returns, submitted under this subsection is tax information subject to G.S. 105‑259. Aggregated payroll or withholding tax information submitted or derived under this subsection is not tax information subject to G.S. 105‑259. When making a submission under this section, the business must pay the Committee a fee of the greater of two thousand five hundred dollars ($2,500) or three one‑hundredths of one percent (.03%) of an amount equal to the grant less the maximum amount to be transferred pursuant to G.S. 143B‑437.61. The fee is due at the time the submission is made. The Secretary of Commerce, the Secretary of Revenue, and the Director of the Office of State Budget and Management shall determine the allocation of the fee imposed by this section among their agencies. The proceeds of the fee are receipts of the agency to which they are credited.

(b)        The Committee may require any information that it considers necessary to effectuate the provisions of this Part.

(c)        The Committee may require any business receiving a grant to submit to an audit at any time.

(d)        The reporting procedures of this section are in lieu of any other general reporting requirements relating to private entities that receive State funds.

"§ 143B‑437.59.  Failure to comply with agreement.

(a)        If the business receiving a grant fails to meet or comply with any condition or requirement set forth in an agreement or with criteria developed by the Committee in consultation with the Attorney General, the Committee shall reduce the amount of the grant or the term of the agreement, may terminate the agreement, or both. The reduction in the amount or the term must, at a minimum, be proportional to the failure to comply measured relative to the condition or criterion with respect to which the failure occurred. The Committee may reduce the amount or term of a grant by formally approving a motion to reduce such grant in accordance with program policies adopted by the Committee for the treatment of failures by businesses to meet or comply with a condition or requirement set forth in the grant agreement, and it shall not be necessary to execute an amendment to the applicable grant agreement. The Committee shall notify any such affected business of the reduction to its grant payment, reflected in any such motion.

(b)        If a business fails to maintain employment at the levels stipulated in the agreement or otherwise fails to comply with any condition of the agreement for any two consecutive years:

(1)        If the business is still within the base period established by the Committee, the Committee shall withhold the grant payment for any consecutive year after the second consecutive year remaining in the base period in which the business fails to comply with any condition of the agreement, and the Committee may extend the base period for up to 24 additional months. Under no circumstances may the Committee extend the base period by more than a total of 24 months. In no event shall the term of the grant be extended beyond the date set by the Committee at the time the Committee awarded the grant.

(2)        If the business is no longer within the base period established by the Committee, the Committee shall terminate the agreement.

(c)        Notwithstanding the provisions of subsections (a) and (b) of this section, if the Committee finds that the business has manipulated or attempted to manipulate employee withholdings with the purpose of increasing the amount of a grant, the Committee shall immediately terminate the agreement and take action to recapture any grant funds disbursed in any year in which the Committee finds the business manipulated or attempted to manipulate employee withholdings with the purpose of increasing the amount of the grant.

"§ 143B‑437.60.  Disbursement of grant.

A business may not receive an annual disbursement of a grant if, at the time of disbursement, the business has received a notice of an overdue tax debt and that overdue tax debt has not been satisfied or otherwise resolved. A business may receive an annual disbursement of a grant only after the Committee has certified that there are no outstanding overdue tax debts and that the business has met the terms and conditions of the agreement. No amount shall be disbursed to a business as a grant under this Part in any year until the Secretary of Revenue has certified to the Committee (i) that there are no outstanding overdue tax debts of the business and (ii) the amount of withholdings received in that year by the Department of Revenue from the business. A business that has met the terms of the agreement shall make an annual certification of this to the Committee. The Committee shall require the business to provide any necessary evidence of compliance to verify that the terms of the agreement have been met. The Committee shall certify the grant amount for which the business is eligible under the agreement and the grant amount for which the business would be eligible under the agreement without regard to G.S. 143B‑437.56(d). The Department of Commerce shall remit a check to the business in the amount of the certified grant amount within 90 days of receiving the certification of the Committee.

"§ 143B‑437.61.  Transfer to Industrial Development Fund Utility Account.

At the time the Department of Commerce remits a check to a business under G.S. 143B‑437.60, the Department of Commerce shall transfer to the Utility Account an amount equal to the amount certified by the Committee as the difference between the amount of the grant and the amount of the grant for which the business would be eligible without regard to G.S. 143B‑437.56(d).

"§ 143B‑437.62.  Expiration.

The authority of the Committee to award new grants expires January 1, 2016.2019.

"§ 143B‑437.63.  JDIG Program cash flow requirements.

Notwithstanding any other provision of law, grants made through the Job Development Investment Grant Program, including amounts transferred pursuant to G.S. 143B‑437.61, shall be budgeted and funded on a cash flow basis. The Office of State Budget and Management shall periodically transfer funds from the JDIG Reserve established pursuant to G.S. 143C‑9‑6 to the Department of Commerce in an amount sufficient to satisfy grant obligations and amounts to be transferred pursuant to G.S. 143B‑437.61 to be paid during the fiscal year.

…."

SECTION 10.(b)  This Part is effective when it becomes law.

 

PART XI.  JUMP‑START OUR BUSINESS START‑UPS ACT

SECTION 11.(a)  G.S. 78A‑17 is amended by adding a new subdivision to read:

"(20)    Any offer or sale of a security by an issuer if the offer or sale is conducted in accordance with G.S. 78A‑17.1."

SECTION 11.(b)  Article 3 of Chapter 78A of the General Statutes is amended by adding a new section to read:

"§ 78A‑17.1.  Invest NC exemption.

(a)        Exemption. – Except as otherwise provided in this Chapter, an offer or sale of a security by an issuer is exempt from G.S. 78A‑24 and G.S. 78A‑49(d) if the offer or sale is conducted in accordance with each of the following requirements:

(1)        The issuer of the security is a business entity formed under the laws of the State and registered with the Secretary of State.

(2)        The transaction meets the requirements of the federal exemption for intrastate offerings in section 3(a)(11) of the Securities Act of 1933, 15 U.S.C. § 77c(a)(11), and SEC rule 147, 17 C.F.R. § 230.147.

(3)        The sum of all cash and other consideration to be received for all sales of the security in reliance upon this exemption does not exceed the cap provided in this subdivision.

a.         One million dollars ($1,000,000), less the aggregate amount received for all sales of securities by the issuer within the 12 months before the first offer or sale made in reliance upon this exemption, if the issuer has not undergone and made available to each prospective investor and the Administrator the documentation resulting from a financial audit with respect to its most recently completed fiscal year and meeting generally accepted accounting principles.

b.         Two million dollars ($2,000,000), less the aggregate amount received for all sales of securities by the issuer within the 12 months before the first offer or sale made in reliance upon this exemption, if the issuer has undergone and made available to each prospective investor and the Administrator the documentation resulting from a financial audit with respect to its most recently completed fiscal year and meeting generally accepted accounting principles.

(4)        The issuer has not accepted more than two thousand dollars ($2,000) from any single purchaser unless the purchaser is an accredited investor as defined by rule 501 of SEC regulation D, 17 C.F.R. § 230.501.

(5)        Not less than 10 days prior to the commencement of an offering of securities in reliance on this exemption or the use of any publicly available Web site in connection with any such offering, the issuer shall file a notice with the Administrator, in writing or in electronic form as specified by the Administrator, containing the following:

a.         A notice of claim of exemption from registration, specifying that the issuer will be conducting an offering in reliance upon this exemption, accompanied by the filing fee as specified in this section.

b.         A copy of the disclosure statement to be provided to prospective investors in connection with the offering, containing the following:

1.         A description of the company, its type of entity, the address and telephone number of its principal office, its history, its business plan, and the intended use of the offering proceeds, including any amounts to be paid, as compensation or otherwise, to any owner, executive officer, director, managing member, or other person occupying a similar status or performing similar functions on behalf of the issuer.

2.         The identity of all persons owning more than ten percent (10%) of the ownership interests of any class of securities of the company.

3.         The identity of the executive officers, directors, managing members, and other persons occupying a similar status or performing similar functions in the name of and on behalf of the issuer, including their titles and their prior experience.

4.         The terms and conditions of the securities being offered and of any outstanding securities of the company, the minimum and maximum amount of securities being offered, if any, and either the percentage ownership of the company represented by the offered securities or the valuation of the company implied by the price of the offered securities.

5.         The identity of any person who has been or will be retained by the issuer to assist the issuer in conducting the offering and sale of the securities, including any Web sites, but excluding persons acting solely as accountants or attorneys and employees whose primary job responsibilities involve the operating business of the issuer rather than assisting the issuer in raising capital, and for each person identified in response to this paragraph, a description of the consideration being paid to such person for such assistance.

6.         A description of any litigation or legal proceedings involving the company or its management.

7.         The names and addresses, including URL, of any Web sites that will be used in connection with the offering.

c.         An escrow agreement with a bank or other depository institution located within this State in which the investor funds will be deposited, providing that all offering proceeds will be released to the issuer only when the aggregate capital raised from all investors is equal to or greater than the minimum target offering amount specified in the business plan as necessary to implement the business plan and that all investors may cancel their commitments to invest if that target offering amount is not raised by the time stated in the disclosure document.

(6)        The issuer is not, either before or as a result of the offering, an investment company, as defined in section 3 of the Investment Company Act of 1940, 15 U.S.C. § 8a‑3, or an entity that would be an investment company but for the exclusions provided in section 3(c) of the act, or subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m and 78o(d).

(7)        The issuer shall inform all prospective purchasers under this section that the securities have not been registered under federal or State securities law and that the securities are subject to limitations on resale. The issuer shall display the following legend conspicuously on the cover page of the disclosure document:

            "IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY SUBSECTION (E) OF SEC RULE 147, 17 C.F.R. § 230.147(E) AS PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME."

(8)        The issuer shall require each purchaser to certify in writing "I understand and acknowledge that:

a.         I am investing in a high‑risk, speculative business venture. I may lose all of my investment, and I can afford the loss of my investment.

b.         This offering has not been reviewed or approved by any state or federal securities commission or other regulatory authority and that no such person or authority has confirmed the accuracy or determined the adequacy of any disclosure made to me relating to this offering.

c.         The securities I am acquiring in this offering are illiquid, that there is no ready market for the sale of such securities, that it may be difficult or impossible for me to sell or otherwise dispose of this investment, and that, accordingly, I may be required to hold this investment indefinitely.

d.         I may be subject to tax on my share of the taxable income and losses of the company, whether or not I have sold or otherwise disposed of my investment or received any dividends or other distributions from the company."

(9)        If the offer and sale of securities is made through an Internet Web site, the following requirements apply:

a.         Prior to the offer of an investment opportunity to residents of this State through a Web site, the issuer shall provide to the Web site and to the Administrator evidence that the issuer is organized under North Carolina law and that it is authorized to do business within the State.

b.         The issuer shall obtain from each purchaser of a security under this section evidence that the purchaser is a resident of North Carolina and, if applicable, an accredited investor.

c.         The Web site operator shall register with the Administrator by filing a statement that it is a business entity that is organized under North Carolina law and that it is authorized to do business within the State and that it is being utilized to offer and sell securities pursuant to this exemption. As part of the registration, the Web site shall notify the Administrator of its and the issuer's identity, location, and contact information.

d.         The issuer and the Web site must keep and maintain records of the offers and sales of securities effected through the Web site and must provide ready access to the records to the Administrator, upon request. The Administrator may access, inspect, and review any Web site and its records.

(10)      All payments for purchase of securities must be directed to and held by the bank or depository institution subject to the provisions of sub‑subdivision (a)(5)c. of this section. The bank or depository institution shall notify the Administrator of the receipt of payments for securities and the identity and residence of the investors. The information shall be confidential and considered trade secrets within the scope of G.S. 132‑1.2 while in the possession of the Administrator.

(11)      No offers or sales of a security shall be made through an Internet Web site unless the Web site is registered with the Administrator pursuant to sub‑subdivision (a)(9)c. of this section. The Web site shall not be subject to the registration provisions of G.S. 78A‑36 provided that all of the following apply:

a.         It does not offer investment advice or recommendations.

b.         It does not solicit purchases, sales, or offers to buy the securities offered or displayed on the Web site.

c.         It does not compensate employees, agents, or other persons for the solicitation or based on the sale of securities displayed or referenced on the Web site.

d.         It is not compensated based on the amount of securities sold, and it does not hold, manage, possess, or otherwise handle investor funds or securities.

e.         It does not engage in such other activities as the Administrator, by rule, determines appropriate.

(12)      An executive officer, director, managing member, or person occupying a similar status or performing similar functions in the name of and on behalf of the issuer shall be exempt from the registration provisions of G.S. 78A‑36, provided that the person does not receive, directly or indirectly, any commission or remuneration for offering and selling securities of the issuer pursuant to this exemption.

(13)      The issuer must provide a copy of the disclosure document provided to the Administrator pursuant to sub‑subdivision (a)(5)b. of this section to each prospective investor at the time the offer of securities is made to the prospective investor. In addition to the information described in sub‑subdivision (a)(5)b. of this section, the disclosure document provided to the Administrator and to prospective investors should include additional information material to the offering, including, where appropriate, a discussion of significant factors that make the offering speculative or risky. This discussion must be concise and organized logically and should not present risks that could apply to any issuer or any offering.

(b)        Indexing. – The dollar limitations provided in subdivision (a)(3) of this section shall be cumulatively adjusted every fifth year by the Administrator to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting each dollar limitation to the nearest fifty thousand dollars ($50,000).

(c)        Report. – An issuer of a security, the offer and sale of which is exempt under this section, shall provide a quarterly report to the issuer's investors until no securities issued under this section are outstanding. The report required by this subsection shall be free of charge. An issuer may satisfy the reporting requirement of this subsection by making the information available on an Internet Web site address if the information is made available within 45 days of the end of each fiscal quarter and remains available until the succeeding quarterly report is issued. An issuer shall file each such quarterly report with the Administrator and must provide a written copy of the report to any investor upon request. The report must contain each of the following:

(1)        Compensation received by each director and executive officer, including cash compensation earned since the previous report and on an annual basis and any bonuses, stock options, other rights to receive securities of the issuer or any affiliate of the issuer, or other compensation received.

(2)        An analysis by management of the issuer of the business operations and financial condition of the issuer.

(d)        Offers and Sales to Controlling Persons. – The exemption provided in this section shall not be used in conjunction with any other exemption under this Chapter, except offers and sales to controlling persons shall not count toward the limitation in subdivision (3) of subsection (a) of this section. A controlling person is an officer, director, partner, trustee, or individual occupying similar status or performing similar functions with respect to the issuer or to a person owning ten percent (10%) or more of the outstanding shares of any class or classes of securities of the issuer.

(e)        Disqualification. – The exemption allowed by this section shall not apply if an issuer or person affiliated with the issuer or offering is subject to any disqualification contained in 18 NCAC 06A .1207(a)(1) through (a)(6) or contained in Rule 262 as promulgated under the Securities Act of 1933 (17 C.F.R. § 230.262). The provisions of this subsection shall not apply if (i) upon a showing of good cause and without prejudice to any other action by the Administrator, the Administrator determines that it is not necessary under the circumstances that an exemption be denied and (ii) the issuer establishes that it made factual inquiry into whether any disqualification existed under this subsection but did not know, and in the exercise of reasonable care could not have known, that a disqualification existed under this subsection. The nature and scope of the requisite inquiry will vary based on the circumstances of the issuer and the other offering participants.

(f)         Rules. – The Administrator may adopt rules to implement the provisions of this section and to protect investors who purchase securities under this section.

(g)        Fee. – The Administrator shall charge a nonrefundable filing fee of one hundred fifty dollars ($150.00) for filing an exemption notice required by subsection (a) of this section. The fees paid to the Administrator pursuant to this subsection shall be used to pay the costs incurred in administering and enforcing this Chapter. The revenue derived from the fee shall be credited to a nonreverting agency revenue account."

SECTION 11.(c)  Notwithstanding any provision of Article 2A of Chapter 150B of the General Statutes, within 12 months of the effective date of this act, the Secretary of State shall adopt rules to implement the provisions of this act in accordance with the following procedure:

(1)        At least 15 business days prior to adopting a rule, submit the rule and a notice of public hearing to the Codifier of Rules. The Codifier of Rules shall publish the proposed rule and the notice of public hearing on the Internet within five business days.

(2)        At least 15 business days prior to adopting a rule, notify persons on the mailing list maintained pursuant to G.S. 150B‑21.2(d) and any other interested parties of the Secretary's intent to adopt a rule and of the public hearing.

(3)        Accept written comments on the proposed rule for at least 15 business days prior to adoption of the rule.

(4)        Hold at least one public hearing on the proposed rule no less than five days after the rule and notice have been published.

A rule adopted in accordance with this section becomes effective on the first day of the month following the month the Secretary adopts the rule and submits the rule to the Codifier of Rules for entry into the North Carolina Administrative Code.

SECTION 11.(d)  Any rule adopted more than 12 months after the effective date of this act shall comply with the requirements of Article 2A of Chapter 150B of the General Statutes.

SECTION 11.(e)  Subsection (a) of Section 11 of this act is effective when it becomes law and expires 12 months after the effective date of this act. Subsection (b) of Section 11 of this act becomes effective 12 months after the effective date of this act and expires on July 1, 2017. The remainder of this Part is effective when it becomes law and expires on July 1, 2017.

 

PART XII.  ECONOMIC INCENTIVE REFUNDS

SECTION 12.(a)  G.S. 105‑164.14A reads as rewritten:

"§ 105‑164.14A.  Economic incentive refunds.

(a)        Refund. – The following taxpayers are allowed an annual refund of sales and use taxes paid under this Article:

(1)        Passenger air carrier. – An interstate passenger air carrier is allowed a refund of the sales and use tax paid by it on fuel in excess of two million five hundred thousand dollars ($2,500,000). The amount of sales and use tax paid does not include a refund allowed to the interstate passenger air carrier under G.S. 105‑164.14(a). This subdivision is repealed for purchases made on or after January 1, 2016.2020.

(2)        Major recycling facility. – An owner of a major recycling facility is allowed a refund of the sales and use tax paid by it on building materials, building supplies, fixtures, and equipment that become a part of the real property of the recycling facility. Liability incurred indirectly by the owner for sales and use taxes on these items is considered tax paid by the owner.

(3)        Business in low‑tier area. – A taxpayer that is engaged primarily in one of the businesses listed in G.S. 105‑129.83(a) in a development tier one area and that places machinery and equipment in service in that area is allowed a refund of the sales and use tax paid by it on the machinery and equipment. For purposes of this subdivision, "machinery and equipment" includes engines, machinery, equipment, tools, and implements used or designed to be used in one of the businesses listed in G.S. 105‑129.83, capitalized for tax purposes under the Code, and not leased to another party. Liability incurred indirectly by the taxpayer for sales and use taxes on these items is considered tax paid by the taxpayer. The sunset for Article 3J of Chapter 105 of the General Statutes for development tier one areas applies to this subdivision.

(4)        Motorsports team or sanctioning body. – A professional motorsports racing team, a motorsports sanctioning body, or a related member of such a team or body is allowed a refund of the sales and use tax paid by it in this State on aviation fuel that is used to travel to or from a motorsports event in this State, to travel to a motorsports event in another state from a location in this State, or to travel to this State from a motorsports event in another state. For purposes of this subdivision, a "motorsports event" includes a motorsports race, a motorsports sponsor event, and motorsports testing. This subdivision is repealed for purchases made on or after January 1, 2016.2020.

(5)        Professional motorsports team. – A professional motorsports racing team or a related member of a team is allowed a refund of fifty percent (50%) of the sales and use tax paid by it in this State on tangible personal property, other than tires or accessories, that comprises any part of a professional motorsports vehicle. For purposes of this subdivision, "motorsports accessories" includes instrumentation, telemetry, consumables, and paint. This subdivision is repealed for purchases made on or after January 1, 2016.2020.

(6)        Analytical services business. – A taxpayer engaged in analytical services in this State is allowed a refund of sales and use tax paid by it. This subdivision is repealed for purchases made on or after January 1, 2014.2020. The amount of the refund is the greater of the following:

a.         Fifty percent (50%) of the eligible amount of sales and use tax paid by it on tangible personal property that is consumed or transformed in analytical service activities. The eligible amount of sales and use tax paid by the taxpayer in this State is the amount by which sales and use tax paid by the taxpayer in this State in the fiscal year exceed the amount paid by the taxpayer in this State in the 2006‑2007 State fiscal year.

b.         Fifty percent (50%) of the amount of sales and use tax paid by it in the fiscal year on medical reagents.

(7)        Railroad intermodal facility. – The owner or lessee of an eligible railroad intermodal facility is allowed a refund of sales and use tax paid by it under this Article on building materials, building supplies, fixtures, and equipment that become a part of the real property of the facility. Liability incurred indirectly by the owner or lessee of the facility for sales and use taxes on these items is considered tax paid by the owner or lessee. This subdivision is repealed for purchases made on or after January 1, 2038.

…."

SECTION 12.(b)  This Part is effective when it becomes law. For purposes of analytical services business, this Part applies to purchases made on or after that date.

 

PART XIII.  INTERACTIVE DIGITAL MEDIA

SECTION 13.(a)  Article 3F of Subchapter I of Chapter 105 of the General Statutes is reenacted as it existed immediately before its repeal and reads as rewritten:

"Article 3F.

"Research and Development.

"§ 105‑129.50.  Definitions.

The definitions in section 41 of the Code apply in this Article. In addition, the following definitions apply in this Article:

(1)        Development tier one area. – Defined in G.S. 143B‑437.08.

(2)        Full‑time job. – Defined in G.S. 105‑129.81.

(3)        Reserved.

(4)        North Carolina university research expenses. – Any amount the taxpayer paid or incurred to a research university for qualified research performed in this State or basic research performed in this State.

(4a)      Participating community college. – A community college, as defined in G.S. 115D‑2, that offers an associate in applied science degree in simulation and game development.

(5)        Period of measurement. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(6)        Qualified North Carolina research expenses. – Qualified research expenses, other than North Carolina university research expenses, for research performed in this State.

(7)        Receipts. – Defined in the Small Business Size Regulations of the federal Small Business Administration.

(8)        Related person. – Defined in G.S. 105‑163.010.

(9)        Research university. – An institution of higher education that meets one or both of the following conditions:

a.         It is classified as one of the following in the most recent edition of "A Classification of Institutions of Higher Education", the official report of The Carnegie Foundation for the Advancement of Teaching:

1.         Doctoral/Research Universities, Extensive or Intensive.

2.         Masters Colleges and Universities, I or II.

3.         Baccalaureate Colleges, Liberal Arts or General.

b.         It is a constituent institution of The University of North Carolina.

(10)      Small business. – A business whose annual receipts, combined with the annual receipts of all related persons, for the applicable period of measurement did not exceed one million dollars ($1,000,000).

"§ 105‑129.51.  Taxpayer standards and sunset.

(a)        A taxpayer is eligible for a credit allowed in this Article if it satisfies the requirements of G.S. 105‑129.83(c), (d), (e), (f), and (g) relating to wage standard, health insurance, environmental impact, safety and health programs, and overdue tax debts, respectively.

(b)        This Article is repealed for taxable years beginning on or after January 1, 2016.2020.

(c)        Repealed by Session Laws 2004‑124, s. 32D.4, effective for taxable years beginning on or after January 1, 2006.

"§ 105‑129.52.  Tax election; cap.

(a)        Tax Election. – A credit allowed in this Article is allowed against the franchise tax levied in Article 3 of this Chapter or the income taxes levied in Article 4 of this Chapter. The taxpayer must elect the tax against which a credit will be claimed when filing the return on which the credit is first claimed. This election is binding. Any carryforwards of a credit must be claimed against the same tax.

(b)        Cap. – A credit allowed in this Article may not exceed fifty percent (50%) of the amount of tax against which it is claimed for the taxable year, reduced by the sum of all other credits allowed against that tax, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of credit, including carryforwards, claimed by the taxpayer under this Article against each tax for the taxable year. Any unused portion of a credit allowed in this Article may be carried forward for the succeeding 15 years.

"§ 105‑129.53.  Substantiation.

To claim a credit allowed by this Article, the taxpayer must provide any information required by the Secretary. Every taxpayer claiming a credit under this Article must maintain and make available for inspection by the Secretary any records the Secretary considers necessary to determine and verify the amount of the credit to which the taxpayer is entitled. The burden of proving eligibility for a credit and the amount of the credit rests upon the taxpayer, and no credit may be allowed to a taxpayer that fails to maintain adequate records or to make them available for inspection.

"§ 105‑129.54.  Report.

The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by credit and by taxpayer:

(1)        The number of taxpayers that took a credit allowed in this Article, itemized by the categories of small business, low‑tier, university research, Eco‑Industrial Park, and other.

(2)        The amount of each credit taken in each category.

(3)        The total cost to the General Fund of the credits taken.

"§ 105‑129.55.  Credit for North Carolina research and development.

(a)        Qualified North Carolina Research Expenses. – A taxpayer that has qualified North Carolina research expenses for the taxable year is allowed a credit equal to a percentage of the expenses, determined as provided in this section. Only one credit is allowed under this section with respect to the same expenses. If more than one subdivision of this section applies to the same expenses, then the credit is equal to the higher percentage, not both percentages combined. If part of the taxpayer's qualified North Carolina research expenses qualifies under more than one subdivision of this section, the applicable percentages apply separately to each part of the expenses.

(1)        Small business. – If the taxpayer was a small business as of the last day of the taxable year, the applicable percentage is three and one‑quarter percent (3.25%).

(2)        Low‑tier research. – For expenses with respect to research performed in a development tier one area, the applicable percentage is three and one‑quarter percent (3.25%).

(2a)      University research. – For North Carolina university research expenses, the applicable percentage is twenty percent (20%).

(2b)      Eco‑Industrial Park. – For expenses with respect to research performed in an Eco‑Industrial Park certified under G.S. 143B‑437.08, the applicable percentage is thirty‑five percent (35%).

(3)        Other research. – For expenses not covered under another subdivision of this section, the percentages provided in the table below apply to the taxpayer's qualified North Carolina research expenses during the taxable year at the following levels:

Expenses Over                 Up To                              Rate

‑0‑                                  $50 million                     1.25%

$50 million                           $200 million                     2.25%

$200 million                             –                                3.25%

(b)        Repealed by Session Laws 2010‑147, s. 5.5, effective January 1, 2011.

"§ 105‑129.56.  Interactive digital media.

(a)        IDM Defined. – Interactive digital media is a product that meets all of the following requirements:

(1)        It is produced for distribution on electronic media, including distribution by file download over the Internet.

(2)        It contains a computer‑controlled virtual universe with which an individual who uses the program may interact in order to achieve a goal.

(3)        It contains a significant amount of at least three of the following five types of data: animated images, fixed images, sound, text, and 3D geometry.

(b)        Credit. – A taxpayer that develops in this State interactive digital media or a digital platform or engine for use in interactive digital media is allowed a credit equal to a percentage of the taxpayer's expenses that exceed fifty thousand dollars ($50,000) and that are paid during the taxable year in developing the media, platform, or engine. The percentage that applies to the expenses is determined under subsection (c) of this section. The expenses to which the credit applies are as follows:

(1)        Compensation and wages for a full‑time job on which withholding payments are remitted to the Department under Article 4A of this Chapter.

(2)        Employee fringe contributions on compensation and wages included under subdivision (1) of this subsection, including health, pension, and welfare contributions.

(3)        Amounts paid to a participating community college or a research university for services performed in this State.

(c)        Percentage. – The percentage of the credit allowed under this section is as follows:

(1)        Higher education collaboration. – Twenty percent (20%) for allowable expenses paid to a participating community college or a research university.

(2)        Other. – Fifteen percent (15%) for allowable expenses not covered in subdivision (1) of this subsection.

(d)        Limitations. – The amount of credit allowed a taxpayer under this section may not exceed seven million five hundred thousand dollars ($7,500,000). The credit allowed by this section does not apply to interactive digital media that meets any of the following descriptions:

(1)        It is developed by the taxpayer for internal use.

(2)        It is an interpersonal communications service, such as videoconferencing, wireless telecommunications, a text‑based channel, or a chat room.

(3)        It is an Internet site that is primarily static and primarily designed to provide information about one or more persons, businesses, companies, or firms.

(4)        It is a gambling or casino game.

(5)        It is political advertising.

(6)        It contains material that is obscene, as defined in G.S. 14‑190.1, or that is harmful to minors, as defined in G.S. 14‑190.13.

(e)        No Double Benefit. – A taxpayer that claims a credit under this section may not claim any of the following with respect to the expenses used to determine the credit under this section:

(1)        A credit allowed under any other section of this Chapter.

(2)        A grant from the Job Development Investment Grant Program, set out in Part 2G of Article 10 of Chapter 143B of the General Statutes.

(3)        A grant from the One North Carolina Fund, set out in Part 2H of Article 10 of Chapter 143B of the General Statutes.

(f)         Sunset. – This section is repealed effective for taxable years beginning on or after January 1, 2020.

"§ 105‑129.57: Reserved for future codification purposes.

"§ 105‑129.58: Reserved for future codification purposes.

"§ 105‑129.59: Reserved for future codification purposes."

SECTION 13.(b)  This Part is effective for taxable years beginning on or after January 1, 2015. For purposes of G.S. 105‑129.56, as reenacted by this Part, the credit applies to expenses occurring on or after that date.

 

PART XIV.  CREDIT FOR MANUFACTURING CIGARETTES FOR EXPORTATION

SECTION 14.(a)  G.S. 105‑130.45 reads as rewritten:

"§ 105‑130.45.  Credit for manufacturing cigarettes for exportation.

(a)        Definitions. – The following definitions apply in this section:

(1)        Base year exportation volume. – The number of cigarettes manufactured and exported by a corporation during the calendar year 2003.

(2)        Exportation. – The shipment of cigarettes manufactured in the United States to any of the following sufficient to relieve the cigarettes in the shipment of the federal excise tax on cigarettes:

a.         A foreign country.

b.         A possession of the United States.

c.         A commonwealth of the United States that is not a state.

(3)        Successor in business. – A corporation that through amalgamation, merger, acquisition, consolidation, or other legal succession becomes invested with the rights and assumes the burdens of the predecessor corporation and  continues the cigarette exportation business.

(b)        Credit. – A corporation engaged in the business of manufacturing cigarettes for exportation to a foreign country and that waterborne exports cigarettes and other tobacco products through the North Carolina State Ports during the taxable year is allowed a credit against the taxes levied by this Part. The amount of credit allowed under this section is determined by comparing the exportation volume of the corporation in the year for which the credit is claimed with the corporation's base  year exportation volume, rounded to the nearest whole percentage. In the case of a successor in business, the amount of credit allowed under this section is determined by comparing the exportation volume of the corporation in the year for which the credit is claimed with all of the corporation's predecessor corporations' combined base year exportation volume, rounded to the nearest whole percentage. The amount of credit allowed may not exceed six million dollars ($6,000,000) and is computed as follows:

 

                Current Year's Exportation                                                   Amount of Credit

                  Volume Compared to its                                                        per Thousand

           Base Year's Exportation Volume                                            Cigarettes Exported

                        120% or more                                                                           40’

                        119% – 100%                                                                           35’

                          99% – 80%                                                                             30’

                          79% – 60%                                                                             25’

                          59% – 50%                                                                             20’

                        Less than 50%                                                                         None

 

(c)        Cap. – The credit allowed under this section may not exceed the lesser of six million dollars ($6,000,000) or fifty percent (50%) of the amount of tax imposed by this Part for the taxable year reduced by the sum of all other credits allowable, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of the credit allowed in any tax year, including carryforwards claimed by the taxpayer under this section for previous tax years. Any unused portion of a credit allowed in this section may be carried forward for the next succeeding ten years.

(d)        Documentation of Credit. – A corporation that claims the credit under this section must include the following with its tax return:

(1)        A statement of the base year exportation volume.

(2)        A statement of the exportation volume on which the credit is based.

(3)        A list of the corporation's export volumes shown on its monthly reports to the Alcohol and Tobacco Tax and Trade Bureau of the United States Treasury for the months in the tax year for which the credit is claimed.

(e)        No Double Credit. – A taxpayer may not claim this credit and the credit allowed under G.S. 105‑130.46 for the same activity.

(f)         Report. – The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers taking a credit allowed in this section.

(2)        The total amount of exports with respect to which credits were taken.

(3)        The total cost to the General Fund of the credits taken.

(g)        Sunset. – This section is repealed effective for cigarettes exported on or after January 1, 2020."

SECTION 14.(b)  G.S. 105‑130.46 reads as rewritten:

"§ 105‑130.46.  Credit for manufacturing cigarettes for exportation while increasing employment and utilizing State Ports.

(a)        Purpose. – The credit authorized by this section is intended to enhance the economy of this State by encouraging qualifying cigarette manufacturers to increase employment in this State with the purpose of expanding this State's economy, the use of the North Carolina State Ports, and the use of other State goods and services, including tobacco.

(b)        Definitions. – The following definitions apply in this section:

(1)        Employment level. – The total number of full‑time jobs and part‑time jobs converted into full‑time equivalences. A job is included in the employment level for a year only if that job is located within the State for more than six months of the year. A job is located in this State if more than fifty percent (50%) of the employee's duties are performed in this State.

(2)        Exportation. – The shipment of cigarettes manufactured in the United States to a foreign country sufficient to relieve the cigarettes in the shipment of the federal excise tax on cigarettes.

(3)        Full‑time job. – A position that requires at least 1,600 hours of work per year and is intended to be held by one employee during the entire year.

(4)        Successor in business. – A corporation that through amalgamation, merger, acquisition, consolidation, or other legal succession becomes invested with the rights and assumes the burdens of the predecessor corporation and continues the cigarette exportation business.

(c)        Employment Level. – In order to be eligible for a full credit allowed under this section, the corporation must maintain an employment level in this State for the taxable year that exceeds the corporation's employment level in this State at the end of the 2004 calendar year by at least 800 full‑time jobs. In the case of a successor in business, the corporation must maintain an employment level in this State for the taxable year that exceeds all its predecessor corporations' combined employment levels in this State at the end of the 2004 calendar year by at least 800 full‑time jobs.

(d)        Credit. – A corporation that satisfies the employment level requirement under subsection (c) of this section, is engaged in the business of manufacturing cigarettes for exportation, and exports cigarettes and other tobacco products through the North Carolina State Ports during the taxable year is allowed a credit as provided in this section. The amount of credit allowed under this section is equal to forty cents (40’) per one thousand cigarettes exported. The amount of credit earned during the taxable year may not exceed ten million dollars ($10,000,000).

(e)        Reduction of Credit. – A corporation that has previously satisfied the qualification requirements of this section but that fails to satisfy the employment level requirement in a succeeding year may still claim a partial credit for the year in which the employment level requirement is not satisfied. The partial credit allowed is equal to the credit that would otherwise be allowed under subsection (d) of this section multiplied by a fraction. The numerator of the fraction is the number of full‑time jobs by which the corporation's employment level in this State for the taxable year exceeds the corporation's employment level in this State at the end of the 2004 calendar year. The denominator of the fraction is 800. In the case of a successor in business, the numerator of the fraction is the number of full‑time jobs by which the corporation's employment level in this State for the taxable year exceeds all its predecessor corporations' combined employment levels in this State at the end of the 2004 calendar year.

(f)         Allocation. – The credit allowed by this section may be taken against the income taxes levied under this Part or the franchise taxes levied under Article 3 of this Chapter. When the taxpayer claims a credit under this section, the taxpayer must elect the percentage of the credit to be applied against the taxes levied under this Part with any remaining percentage to be applied against the taxes levied under Article 3 of this Chapter. This election is binding for the year in which it is made and for any carryforwards. A taxpayer may elect a different allocation for each year in which the taxpayer qualifies for a credit.

(g)        Ceiling. – The total amount of credit that may be taken in a taxable year under this section may not exceed the lesser of the amount of credit which may be earned for that year under subsection (d) of this section or fifty percent (50%) of the amount of tax against which the credit is taken for the taxable year reduced by the sum of all other credits allowable, except tax payments made by or on behalf of the taxpayer. This limitation applies to the cumulative amount of the credit allowed in any tax year, including carryforwards claimed by the taxpayer under this section or G.S. 105‑130.45 for previous tax years.

(h)        Carryforward. – Any unused portion of a credit allowed in this section may be carried forward for the next succeeding 10 years. All carryforwards of a credit must be taken against the tax against which the credit was originally claimed. A successor in business may take the carryforwards of a predecessor corporation as if they were carryforwards of a credit allowed to the successor in business.

(i)         Documentation of Credit. – A corporation that claims the credit under this section must include the following with its tax return:

(1)        A statement of the exportation volume on which the credit is based.

(2)        A list of the corporation's export volumes shown on its monthly reports to the Alcohol and Tobacco Tax and Trade Bureau of the United States Treasury for the months in the tax year for which the credit is claimed.

(3)        Any other information required by the Department of Revenue.

(j)         No Double Credit. – A taxpayer may not claim this credit and the credit allowed under G.S. 105‑130.45 for the same activity.

(k)        Report. – The Department must include in the economic incentives report required by G.S. 105‑256 the following information itemized by taxpayer:

(1)        The number of taxpayers that took the credit allowed in this section.

(2)        The amount of cigarettes and other tobacco products exported through the North Carolina State Ports with respect to which credits were taken.

(3)        The percentage of domestic leaf content in cigarettes produced during the previous year, as reported by the taxpayer.

(4)        The total cost to the General Fund of the credits taken.

(l)         Sunset. – This section expires for exports occurring on or after January 1, 2020."

SECTION 14.(c)  This Part is effective when it becomes law.

 

PART XV.  EARNED INCOME TAX CREDIT

SECTION 15.(a)  G.S. 105‑151.31 is reenacted as it existed immediately before its expiration and reads as rewritten:

"§ 105‑151.31.  Earned income tax credit.

(a)        Credit. – An individual who claims for the taxable year an earned income tax credit under section 32 of the Code is allowed a credit against the tax imposed by this Part equal to a percentage of the amount of credit the individual qualified for under section 32 of the Code. A nonresident or part‑year resident who claims the credit allowed by this section must reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105‑134.5(b) or (c), as appropriate. The percentage is as follows:

(1)        For taxable year 2013, four and one‑half percent (4.5%).2015, two and one‑half percent (2.5%).

(2)        For all other taxable years, five percent (5%).

(b)        Credit Refundable. – If the credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. Section 3507 of the Code, Advance Payment of Earned Income Credit, does not apply to the credit allowed by this section. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits.

(c)        Sunset. – This section is repealed effective for taxable years beginning on or after January 1, 2014.2019."

SECTION 15.(b)  This Part is effective for taxable years beginning on or after January 1, 2015.

 

PART XVI.  EFFECTIVE DATE

SECTION 16.  Except as otherwise provided, this act is effective when it becomes law.