NC Chamber’s Position: Tax reform is important to North Carolina's business community because tax policy is de facto economic development policy. The Chamber recognizes the following key factors when discussing tax reform with policymakers:
1) NC’s competitive position is paramount if our state is going to attract, retain and grow good jobs for working families.
2) In crafting tax policy it is important to avoid taxing investments and production. Doing so discourages both. Tax rates are important, but what you tax is equally important.
3) Businesses need certainty, in both what the tax policy is and in how it is administered and enforced. Uncertainty discourages capital investment.
4) If the sales tax base is going to be expanded, we should avoid, to the extent possible, taxing business-to-business services. This is closely related to the principle of avoiding taxing production. Business pays a lot of sales tax today – about 40 percent of the sales tax collected in North Carolina is paid by business. It is the second largest tax business pays after the property tax.
The 2011 legislature has pledged to examine overall tax reform in North Carolina, though a $2.4 billion state budget gap may delay comprehensive reform until 2012.
2011 Legislative Victories:
BILL SUMMARY
PRO-BIZ or NO-BIZ
OUTCOME
Tax Relief for Small Businesses (H200)
Supported provision in state budget that gives small businesses and start-up companies, whose gross receipts do not exceed $825,000, a tax exemption for the first $50,000 in net income, to spur privatesector job creation
PASSED
Expiration of Temporary Tax (H200)
$1.3 billion put back into the hands of North Carolinians by letting temporary sales tax, reduced from 5.25% to 4.25%, and corporate and personal income tax surcharges expire July 1, 2011, as scheduled.
PASSED
Reform Unemployment Insurance Tax Structure (S99) Worked to create a more sustainable unemployment insurance system by supporting the authorization of the Department of Commerce to hire a consultant to analyze the state’s UI system including tax structure, benefits and ensuring sound administration of the fund.
Promoted Competitive Tax Climate (H619) Successfully pushed tax reform to create a predictable and fair tax system by clarifying combined tax return laws for multi-state businesse.
Provided Fairness and Predictability in Tax Rules (State Budget):With the involvement of members and pro-jobs allies (specifically, the NC Retail Merchants Association and the Council on State Taxation), the Chamber was able to stop the NC Department of Revenue from unfairly and unlawfully levying hefty penalties against major NC employers in cases where corporations filed combined returns as directed within the 60 days required. The language originally included in Senate Bill 1172 was amended and included in the final state budget. It simply clarifies when certain tax penalties are appropriate and provides the fairness and due process in tax administration that all taxpayers deserve.
Supported Tax Credits and Regulatory Reform Aimed at Job Creation (House Bill 1973):The North Carolina Chamber supported a multi-faceted proposal containing various incentives and provisions aimed at creating jobs and getting our state’s economy growing again. Provisions contained in HB 1973 provided tax credits and economic development incentives for a wide array of industries.
Modernizing Tax Rules to Facilitate Investment in Jobs and Economic Development (Senate Bill 308): The North Carolina Chamber was proud to support the creation of a new legal entity, the Low Profit Limited Liability Company (L3C) that is designed to attract private foundation money for the revitalization of endangered enterprises, specifically manufacturers, to facilitate job creation in high unemployment areas across the state.
