NC Legislative Update - March 2017 #5

by Nexsen Pruet, PLLC
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This week

Another seemingly deliberate week at the legislature picked up the pace very quickly Wednesday afternoon, with rumors of a deal to repeal House Bill 2, North Carolina’s controversial “bathroom bill”. On Thursday the Republican led NC legislature passed, and Governor Cooper (D) signed House Bill 142, a compromise for a “reset” to the controversial 2016 law that has put NC in national and international headlines. Discussions have been ongoing regarding a compromise for two-months and negotiations finally broke through on Wednesday evening, the day before the NCAA’s deadline to remove NC from consideration for events through 2022. It is unclear if this will change the outcome of any NCAA site selections. The compromise sharply divided both the Republican and Democratic caucuses in each chamber and drew opposition from various influential interest groups on both the left and the right. The bill:

  • Repeals House Bill 2;
  • Preempts regulation of access to multiple occupancy restrooms, showers, or changing facilities by any State or local government, except in accordance with an act of the General Assembly;
  • Prohibits a local government from enacting or amending an ordinance regulating private employment practices or regulating public accommodations. This section would expire December 1, 2020.

Senate Pro-Tem Phil Berger (R-Rockingham) and Senate Minority Leader Dan Blue (D-Wake), presented the bill in Committee and argued for passing the bill on the floor. Ultimately the bill passed the Senate 32-16, passing with 9 DEM & 23 GOP voting in favor and 6 DEM & 10 GOP voting against. The amended House bill then went back to the House for concurrence where it passed 70-48, passing with 30 DEM & 40 GOP voting in favor and 15 DEM & 33 GOP voting against it. 
NC Senate, House approve HB2 repeal compromise – N&O 
HB2 repealed, but many unhappy with 'reset' – WRAL 
'This is a bait and switch': Liberal groups are furious over North Carolina's 'bathroom law' replacement – Business Insider 
NC Gov. Roy Cooper Signs Compromise Bill Repealing HB2 – WUNC 

Full transcript of NCAA president Mark Emmert’s HB2 comments – N&O 
N.C. Commerce ready to roll out welcome mat to expanding, relocating companies after HB2 – CBJ

The Senate continued the process of confirming more of Gov. Cooper’s cabinet nominees. The Senate Health Committee unanimously recommended Secretary Mandy Cohen of the Department of Health & Human services (DHHS) for confirmation. The even-tempered hearing was expected to be one of the more contentious confirmations. Questions were raised due to her ties to the Affordable Care Act and the Governor’s recent Medicaid expansion attempt. The Senate was supposed to begin the hearing for Secretary Michael Regan of the Department of Environmental Quality (DEQ) on Thursday, but that hearing was postponed. 
DHHS secretary breezes through confirmation – WRAL

The Senate extended its bill filing deadline for public bills into next week, giving Senators until Tuesday, April 4th, to introduce those bills. They also removed the filing deadline for Constitutional Amendments that met the bill drafting request deadline. The Senate does not have deadlines for Appropriations/Finance bills. In the House, which has a slightly delayed deadline calendar, the deadline for filing local bills has passed. As has the deadline to submit non-Appropriation/Finance public bills and resolutions to bill drafting. Those bills must be filed by April 12th. Public bills that do have an impact on Appropriations or Finance must be submitted to bill drafting by next Thursday, April 6th, and filed by April 25th. Crossover currently remains scheduled for April 27th, although that date may change.

In total 256 bills were filed this week, with 66 in the House and with a heavy load of 190 bills filed in the Senate due to the bill filing deadline, bringing the total number of bills filed so far this session to 1,126. After 10 weeks of session, only 4 bills total have become law, and there are no bills pending on the Governor’s desk. A link to next week’s announced Committee calendar can be found here. A cumulative list of House and Senate bills filed so far this year, links to each bill, and its current status can be found here.

Legislation in the News: 
Lawmakers Move to Rein In Mental Health CEO Salaries – NC Health News 
Lawmaker calls for NC Secretary of State to resign or risk impeachment – NSJ 
Teaching Fellows revival moves forward with broad support – WRAL 
Fight against opioid addiction brings both parties together – WBTV 
Bill would help create new state park in Southeast NC – WNCN 
Public notice bills generate debate – Lexington Dispatch 
N.C. House approves property tax break for disabled veterans – Fayetteville Observer 
Study aims to end school calendar wars – WRAL 
Senators file bill to expand aquaculture – NSJ 
Lifetime limits for governor, lieutenant governor proposed – WRAL 
Concealed handgun option for church services on private NC K-12 campuses OK’d – WNCN 
State retirees try again for cost-of-living increase – WRAL

Alcohol

Senate Bill 155, entitled Economic & Job Growth for NC Distilleries, better known as “the brunch bill”, passed the Senate Commerce & Insurance Committee yesterday. Sponsored by Sen. Rick Gunn (R-Alamance), the bill would make various changes to the State’s current ABC laws. The most discussed provision, and the reason for being dubbed the brunch bill, would allow restaurants to sell alcoholic beverages beginning at 10:00 AM on Sundays, two hour earlier than current law permits. In-state distilleries would also benefit under the proposal. One provision would authorize distilleries to sell their product in closed containers at wholesale or retail, subject to the laws of other jurisdictions, for delivery outside the State. Another provision would allow distilleries to sell up to five bottles of liquor per year, on site, to an individual that tours the distillery. This is in an increase to the current law, enacted in recent years which allows for the sale of one bottle per customer, per year. SB 155 would also allow distilleries to obtain a newly created special event permit to offer free tastings of its products at events and ABC stores. This bill also authorizes the creation of a special permit valid for one auction, which allows the permit holder to sell any quantity of beer, wine, unfortified wine, or liquor at an auction.

This week, Rep. Chuck McGrady (R-Henderson), a Co-Chair of the House ABC Committee, filed House Bill 500, entitled ABC Omnibus Legislation. Among other provisions, the bill makes a variety of technical changes to the State’s ABC laws. The most notable sections of the bill deal with craft breweries and their authority to self-distribute their product. Current law requires an in-state brewer to use a third-party distributor once they reach a production threshold of 25,000 barrels of beer. HB 500 would raise that threshold to 200,000 barrels of beer. For perspective, 25,000 barrels of beer is equivalent to 8.25 Million 12oz bottles of beer and thus, 200,000 barrels would be equivalent to 66 Million 12oz bottles of beer. Another provision of contention would allow a small brewery, defined in this legislation as producing less than the 200,000-barrel threshold, electing to use a distributor, to terminate that franchise agreement without good cause at any time. It also directs the Legislative Research Commission to study a total rewrite of the State’s ABC laws.

Proponents of the bill argue that the distribution cap is an arbitrary number that inhibits the free market by requiring brewers to relinquish their distribution to a third party once their production reaches a certain level. Opponents of the legislation note that alcohol is a controlled substance that does not exist in a free market, and that self-distribution is intended to benefit small breweries. They argue raising the cap would give a competitive advantage to the three breweries that are near the cap and have not already elected to utilize a distributor. They also note that NC already has the most lenient self-distribution law in the Southeast.

The other Co-Chair of the House ABC Committee, Rep. Jamie Boles (R-Moore), has filed House Bill 480, entitled ABC Permits/Tax Compliance & Reports. The bill would require the ABC Commission and the NC Department of Revenue to annually certify that breweries and distilleries are compliant with excise tax collections. It would also require certain brewery permit holders to submit an annual report to the ABC Commission.

Senate Tax Relief

The Senate Finance Committee and the Senate Rules Committee passed Senate Bill 325, the Senate tax relief plan sponsored by Sen. Jerry Tillman (R-Randolph), Sen. Andrew Brock (R-Davie), and Sen. Tommy Tucker (R-Union), the Co-Chairs of the Senate Finance Committee. Senate leadership has touted the bill as $1 Billion in tax relief for the middle class. The proposal is calendared for Monday evening. Highlights include:

  • Reducing the State personal income tax rate from 5.499% to 5.35%;
  • Raising the standard deduction to remove approximately 94,000 people from income tax liability in the State, increasing the share of the income tax burden towards wealthier individuals, without increasing their taxes. The amount of income in the zero-tax-bracket would increase: from $17,500 to $20,000 by 2018 for married filing jointly; from $14,000 to $15,000 for head of household; and from $8,750 to $10,000 for single filings or married filing separately; 
  • Modifies the mortgage interest deduction which is currently capped at $20,000 to: $22,000 for married filing jointly; $16,500 for head of household; and $11,000 for single filings or married filing separately;
  • Modifies the child deduction amount to coincide with adjusted growth income and filing status, scaling from $2,500 deduction for each dependent in the lowest income bracket, to zero deduction for the highest income bracket;
  • Reduces the State’s corporate income tax rate, which is currently 3%, would drop to 2.75% in 2018 and 2.5% in 2019;
  • Provides a reduction to the franchise tax for S-Corporations;
  • Shifts the method of tax collection on some businesses to market-based sourcing. The move benefits North Carolina based businesses by shifting to taxation on a company’s revenues from sales from the State, rather than taxing investments and employment.

Senate tax-cut plan would benefit families, NC firms – WRAL 
Income tax cuts clear NC Senate committee over Democrats’ objections – N&O

In Other News

The Durham Democratic Party appointed district judge Marcia Morey to serve the remainder of the vacant term left in the wake of the late Rep. Paul Luebke, as the newest member of the North Carolina House of Representatives. Rep. Phil Lehman (D-Durham) has been serving in the role since Rep. Luebke’s passing.

In the News

Blue: Special election will happen – Winston-Salem Chronicle
If NC wants to feed itself – and the world – it needs to save its farms – N&O
N.C. Senate elects six members to UNC board of governors – Winston-Salem Journal
Veteran entrepreneurship, protecting military installations are top priorities for NC's Secretary of Military & Veterans Affairs ahead of Fayetteville visit – Fayetteville Observer
Should NC borrow $1.9 billion for school construction? School boards, counties propose bond – N&O
Alumni Power in Statehouses – Inside Higher Ed

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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