GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

S	1 

SENATE BILL 205*

Short Title:  Repeal Intangibles Tax.	(Public)
─────────────────────────────────────── 
Sponsors: Senators Rauch, Plyler, Winner; Smith, Carpenter, and Hardin.
─────────────────────────────────────── 
Referred to:  Finance.
─────────────────────────────────────── 

February 20, 1989

A BILL TO BE ENTITLED
AN ACT TO REPEAL THE TAX ON INTANGIBLE PERSONAL PROPERTY, TO REIMBURSE COUNTIES AND CITIES FOR THE RESULTING REVENUE LOSS, AND TO INCREASE INCOME TAXES TO PAY FOR THE REIMBURSEMENT.
The General Assembly of North Carolina enacts:
Section 1.  Effective January 1, 1990, G.S. 105-213.1 is transferred to Article 12 of Chapter 105 of the General Statutes and is redesignated as G.S. 105-275.1.
Sec. 2.  Effective January 1, 1990, G.S. 105-275.1, as designated by this act, reads as rewritten:
"§ 105-275.1.  Reimbursement for exclusion of intangible personal property.
(a)	Distribution.  As soon as practicable after July 1 of 1986, the Secretary of Revenue shall allocate for distribution to each county and the municipalities located in the county the amount allocated to that county from taxes levied under G.S. 105-199, 105-200, and 105-205 for the last taxable year in which these taxes were levied, plus or minus a sum that equals the product of this amount and the percentage by which State disposable personal income has increased or decreased during the most recent 12-month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
Thereafter, as soon as practicable after July 1 of each year, the Secretary shall allocate to each county the amount of funds allocated to the county under this subsection the preceding year, plus or minus a sum that equals the product of this amount and the percentage by which State disposable personal income has increased or decreased during the most recent 12-month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
Amounts allocated to a county under this section shall in turn be divided and distributed between the county and the municipalities located in the county in proportion to the total amount of ad valorem taxes levied by each during the fiscal year preceding the distribution.  For the purpose of computing the distribution to any county and the municipalities located in the county for any year with respect to which the property valuation of a public service company is the subject of an appeal and the Department of Revenue is restrained by law from certifying the valuation to the appropriate counties and municipalities, the Department shall use the last property valuation of that public service company that has been certified.
The governing body of each county and municipality shall report to the Secretary of Revenue such information as he may request for his guidance in making the distribution under this subsection.  If a county or municipality fails to make a requested report within the time prescribed, the Secretary may disregard that county or municipality in making the distribution.
(a1)	Supplemental Distribution.  As soon as practicable after July 1 of 1991, the Secretary of Revenue shall allocate for distribution to each county the amount allocated to that county from taxes levied under G.S. 105-201, 105-202, 105-203, and 105-204, for the last taxable year in which these taxes were levied, including the amount by which the allocation was increased under G.S. 105-213, plus or minus an amount that equals the product of this amount and the percentage by which State personal income has increased or decreased during the most recent 12-month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
  Thereafter, as soon as practicable after July 1 of each year, the Secretary shall allocate to each county the amount of funds allocated to the county under this subsection the preceding year, plus or minus a sum that equals the product of this amount and the percentage by which State personal income has increased or decreased during the most recent 12-month period for which State personal income data has been compiled by the Bureau of Economic Analysis of the United States Department of Commerce.
  Amounts allocated to a county under this subsection shall in turn be divided and distributed between the county and the municipalities located in the county in accordance with the method by which funds are distributed under subsection (a) of this section.
(b)	Restrictions on Use.  Amounts distributed to a county or a municipality under this section shall be used by the county or municipality in proportion to other property tax levies made by it for various funds and activities.
 	”(d)	Source.  Amounts distributed under this section shall be charged to individual income tax collections."
Sec. 3.  Article 7 of Chapter 105 of the General Statutes, as amended by this act, and G.S. 105-276 are repealed.  Any taxes collected pursuant to Article 7 of Chapter 105 of the General Statutes on or after July 1, 1990, shall remain in the General Fund and any refunds made on or after July 1, 1990, of taxes collected pursuant to Article 7 of Chapter 105 of the General Statutes shall be charged to the General Fund.
Sec. 4.  G.S. 105-275 is amended by adding a new subdivision to read:
"(38)	Accounts receivable, evidences of debt, stocks, bonds, and beneficial interests in trusts held by foreign fiduciaries."
Sec. 5.  G.S. 105-285(b) reads as rewritten:
	"(b) Personal Property; General Rule. – Except as provided in subsection (c) below, the value, ownership, and place of taxation of tangible personal property shall be determined annually as of January 1."
Sec. 6.  G.S. 105-288 reads as rewritten:
"§ 105-288.  Functions of Department and Property Tax Commission; oath; expenses.
(a)	Duties of the Department of Revenue:
(1)	The Department shall exercise general and specific supervision over the valuation and taxation of property by counties and municipalities throughout the State.
(2)	The Department is responsible for appraising the property of public service companies as defined in G.S. 105-333.
(b)	Duties of the Property Tax Commission:
(1)	The Commission is constituted as the State board of equalization and review for the valuation and taxation of property in the State.
(2)	The Commission shall hear appeals from the appraisal and assessment of the property of public service companies as defined in G.S. 105-333.
(c)	Each member of the Commission, the Secretary of Revenue, and the employees of the Department assigned duties and responsibilities enumerated in this Chapter shall take and subscribe the oath set up below and file it with the Secretary of State:
I, ................., do solemnly swear, or affirm, that I will support and maintain the Constitution and laws of the United States, and the Constitution and laws of North Carolina not inconsistent therewith, and that I will faithfully discharge the duties of my office and that I will not allow my actions in such office to be influenced by personal or political friendships or obligations, so help me, God.
......................
             Signature
(d)	All expenses of the Commission, and the Department of Revenue in performing the duties enumerated in this Article shall be paid from funds appropriated out of revenue derived from the local sales and use taxes levied pursuant to Article 42 of this Chapter.  "
Sec. 7.  G.S. 105-501 reads as rewritten:
"§ 105-501. Distribution of additional taxes.
The Secretary shall, on a quarterly basis, allocate the net proceeds of the additional one-half percent (1/2%) sales and use taxes levied under this Article to the taxing counties on a per capita basis according to the most recent annual population estimates certified to the Secretary by the State Budget Officer.  The Secretary shall then adjust the amount allocated to each county as provided in G.S. 105-486(b).  The amount allocated to each taxing county shall then be divided among the county and the municipalities located in the county in accordance with the method by which the one percent (1%) sales and use taxes levied in that county pursuant to Article 39 of this Chapter or Chapter 1096 of the 1967 Session Laws are distributed.
If any taxes levied under this Article by a county have not been collected in that county for a full quarter because of the levy or repeal of the taxes, the Secretary shall distribute a pro rata share to that county for that quarter based on the number of months the taxes were collected in that county during the quarter.
In determining the amount to be distributed, the Secretary shall deduct from the net proceeds collected under this Article the cost to the State for the preceding quarter to:
(1)	Perform the duties imposed upon the Department of Revenue by Article 15 of this Chapter;
(2)	Operate the Property Tax Commission; and
(3)	Operate a training program in property tax appraisal and assessment administration by the Institute of Government."
Sec. 8.  G.S. 105-333(3) reads as rewritten:
"(3)	‘Distributable system property' means all real property and tangible personal property owned or used by a railroad company other than nondistributable system property."
Sec. 9.  G.S. 105-333(17) reads as rewritten:
"(17)	‘System property' means the real property and tangible personal property used by a public service company in its public service activities.  It also means public service company property under construction on the day as of which property is assessed which when completed will be used by the owner in its public service activities."
Sec. 10.  G.S. 105-305(a) reads as rewritten:
	"(a) Listing Instructions.  This section applies to all taxable intangible personal property that has a tax situs in this State and that is not required to be appraised originally by the Department of Revenue. The place in this State at which such property is taxable shall be determined according to the rules prescribed in subsections (b) through (e), below.  The person whose duty it is to list property shall list it in the county in which the place of taxation is located, indicating on the abstract the information required by G.S. 105-309(d).  If the place of taxation lies within a city or town that requires separate listing under G.S. 105-326(a), the person whose duty it is to list shall also list the property for taxation in the city or town."
Sec. 11.  G.S. 105-115(2) reads as rewritten:
"(2)	The value upon which the tax herein levied shall be assessed by the Secretary of Revenue and the measure of the extent to which every such railroad company is carrying on intrastate commerce within the State of North Carolina shall be fifty-five percent (55%) of the appraised value of the total tangible property in this State, for each such railroad company, as determined for ad valorem taxation during the calendar year in which such report is due."
Sec. 12.  Effective for taxable years beginning on or after January 1, 1991, G.S. 105-120.2(b)(2) reads as rewritten:
	"(2) Notwithstanding the provisions of subdivision (1) of this subsection, if the tax produced pursuant to application of this paragraph (2) exceeds the tax produced pursuant to application of subdivision (1), then the tax shall be levied at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) on the greater of the amounts of
a.	Fifty-five percent (55%) of the appraised value as determined for ad valorem taxation of all the real and tangible personal property in this State of each such corporation; or 
b.	The total actual investment in tangible property in this State of such corporation as computed under G.S. 105-122(d)."
Sec. 13.  Effective for taxable years beginning on or after January 1, 1991, G.S. 105-122(d) reads as rewritten:
"(d)	After determining the proportion of its total capital stock, surplus and undivided profits as set out in subsection (c) of this section, which amount so determined shall in no case be less than fifty-five percent (55%) of the appraised value as determined for ad valorem taxation of all the real and tangible personal property in this State of each such corporation nor less than its total actual investment in tangible property in this State, every corporation taxed under this section shall annually pay to the Secretary of Revenue, at the time the report and statement are due, a franchise or privilege tax, which is hereby levied at the rate of one dollar and fifty cents ($1.50) per one thousand dollars ($1,000) of the total amount of capital stock, surplus and undivided profits as herein provided.  The tax imposed in this section shall in no case be less than twenty-five dollars ($25.00) and shall be for the privilege of carrying on, doing business, and/or the continuance of articles of incorporation or domestication of each such corporation in this State.  Appraised value of tangible property including real estate shall be the ad valorem valuation for the calendar year next preceding the due date of the franchise tax return.  The term ‘total actual investment in tangible property' as used in this section shall be construed to mean the total original purchase price or consideration to the reporting taxpayer of its tangible properties, including real estate, in this State plus additions and improvements thereto less reserve for depreciation as permitted for income tax purposes, and also less any indebtedness incurred and existing by virtue of the purchase of any real estate and any permanent improvements made thereon.  In computing ‘total actual investment in tangible personal property' there shall also be deducted reserves for the entire cost of any air-cleaning device or sewage or waste treatment plant, including waste lagoons, and pollution abatement equipment purchased or constructed and installed which reduces the amount of air or water pollution resulting from the emission of air contaminants or the discharge of sewage and industrial wastes or other polluting materials or substances into the outdoor atmosphere or into streams, lakes, or rivers, upon condition that the corporation claiming such deduction shall furnish to the Secretary a certificate from the Department of Natural Resources and Community Development certifying that said Department has found as a fact that the air-cleaning device, waste treatment plant or pollution abatement equipment purchased or constructed and installed as above described has actually been constructed and installed and that such device, plant or equipment complies with the requirements of said Environmental Management Commission with respect to such devices, plants or equipment, that such device, plant or equipment is being effectively operated in accordance with the terms and conditions set forth in the permit, certificate of approval, or other document of approval issued by the Environmental Management Commission and that the primary purpose thereof is to reduce air or water pollution resulting from the emission of air contaminants or the discharge of sewage and waste and not merely incidental to other purposes and functions.  The cost of constructing facilities of any private or public utility built for the purpose of providing sewer service to residential and outlying areas shall be treated as deductible for the purposes of this section; the deductible liability allowed by this section shall apply only with respect to such pollution abatement plants or equipment constructed or installed on or after January 1, 1955.
In determining the total tax payable by any corporation under this section, there shall be allowed as a credit on such tax the amount of the credit authorized by Division V of Article 4 of this Chapter."
Sec. 14.  Effective July 1, 1991, G.S. 108A-93 reads as rewritten:
"§ 108A-93. Withholding of State moneys from counties failing to pay public assistance costs.
The Director of the Budget is authorized to withhold from any county that does not pay its full share of public assistance costs to the State and has not arranged for payment pursuant to G.S. 108-54.1 or G.S. 108A-89, any State moneys appropriated from the General Fund for public assistance and related administrative costs, or to direct the Secretary of Revenue and State Treasurer to withhold any funds to be distributed to a county under G.S. 105-275.1 or any tax owed to a county under G.S. 105-113.82, Article 39 of Chapter 105 of the General Statutes or Chapter 1096 of the Session Laws of 1967. The Director of the Budget shall notify the chairman of the board of county commissioners of the proposed action prior to the withholding of funds."
Sec. 15.  Division I of Article 4 of Chapter 105 is amended by adding after G.S. 105-130.3 a new section to read:
"§ 105-130.3A.  Income tax surtax.
In addition to the income tax imposed by G.S. 105-130.3, each corporation required to file a return under this Division shall pay an income tax surtax equal to three and one-half percent (3.5%) of the amount of income tax payable by the corporation to the State for the taxable year.  This tax is due on or before the fifteenth day of the third month following the close of the corporation's taxable year."
Sec. 16.  G.S. 105-136 reads as rewritten:
"§ 105-136. Individuals.
A tax is hereby imposed upon every resident of this State which shall be levied, collected, and paid annually, with respect to the net income of the taxpayer as herein defined, and upon the net income derived from North Carolina sources of every nonresident individual which is attributable to the ownership of any interest in real or tangible personal property in this State or which is from a business, trade, profession, or occupation carried on in this State, computed at the following rates, after deducting the exemptions provided in this Division.
On the excess over the amount legally exempted, up to two thousand dollars ($2,000), three percent (3%).
On the excess above two thousand dollars ($2,000), and up to four  thousand dollars ($4,000), four percent (4%).
On the excess above four thousand dollars ($4,000), and up to six  thousand dollars ($6,000), five percent (5%).
On the excess over six thousand dollars ($6,000), and up to ten thousand dollars ($10,000), six percent (6%).
On the excess over ten thousand dollars ($10,000), and up to thirty thousand dollars ($30,000), seven percent (7%).
On the excess over thirty thousand dollars ($30,000), and up to sixty thousand dollars ($60,000), seven and one-half percent (7.5%).
On the excess over sixty thousand dollars ($60,000), eight percent (8%)."
Sec. 17.  This act does not affect the rights or liabilities of the State, a taxpayer, or other person arising under a statute amended or repealed by this act before its amendment or repeal; nor does it affect the right to any refund or credit of a tax that would otherwise have been available under the amended or repealed statute before its amendment or repeal.
Sec. 18.  Sections 1 and 2 of this act shall become effective January 1, 1990.  Section 7 of this act shall become effective January 1, 1990, and applies to sales and use taxes collected on sales made on or after that date.  Sections 12 and 13 of this act are effective for taxable years beginning on or after January 1, 1991.  Section 14 of this act shall become effective July 1, 1991.  The remainder of this act is effective for taxable years beginning on or after January 1, 1990.