GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 1065

Short Title:  Corporate Welfare Reform.	(Public)

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Sponsors: Representative Luebke.

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Referred to:  Business & Labor, if favorable, Finance.

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May 15, 1995

A BILL TO BE ENTITLED
AN ACT TO REFORM CORPORATE WELFARE AND OTHER TAX EXPENDITURES.
Whereas, "tax expenditures", also known as tax loopholes, represent special tax benefits to certain groups of individuals or businesses that have access to and influence upon the General Assembly; and
Whereas, these special tax benefits have been characterized as "corporate welfare" because they amount to a taxpayer subsidy of special economic interest groups; and
Whereas, the average citizen or small business has limited access to and little influence upon General Assembly debate; and
Whereas, the granting of special tax benefits to certain influential groups has the effect of shifting the tax burden and thus increasing taxes for all other citizens and businesses, and has the additional effect of limiting resources for necessary State programs such as education; and
Whereas, repealing special tax benefits that have been granted to specific groups can result in lower taxes for all taxpayers as well as additional funds for necessary programs; and
Whereas, for these reasons, the General Assembly by this bill reforms corporate welfare by repealing special tax benefits; Now, therefore,
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-130.4(i) reads as rewritten:
"(i)	All business income of corporations other than public utilities and excluded corporations shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator of which is three. If one or more of these factors does not exist, the denominator of the fraction shall be the number of existing factors."
Sec. 2.  G.S. 105-130.5(a) is amended by adding a new subdivision to read:
"(2a)	That portion of a financial institution's interest expense that is allocable to interest income exempt from taxation under this Division.  The allocable portion of the interest expense is the portion for which deduction would be disallowed pursuant to section 265(b) of the Code if the interest were earned on a tax-exempt obligation as defined in section 265(b) of the Code."
Sec. 3.  G.S. 105-130.41 and G.S. 105-151.22 are repealed.
Sec. 4.  G.S. 105-164.13(1), (2), and (4c) are repealed.
Sec. 5.  G.S. 105-187.3(a) reads as rewritten:
"(a)	Amount. – The rate of the use tax imposed by this Article is three percent (3%) of the retail value of a motor vehicle for which a certificate of title is issued.  The tax is payable as provided in G.S. 105-187.4.  The tax may not be less than forty dollars ($40.00) for each motor vehicle for which a certificate of title is issued, unless the issuance of a title for the vehicle is exempt from tax under G.S. 105-187.6(a).  The tax may not be more than one thousand dollars ($1,000) for each certificate of title issued for a Class A or Class B motor vehicle that is a commercial motor vehicle, as defined in G.S. 20-4.01.  "
Sec. 6.  Notwithstanding G.S. 105-163.41, no addition to tax may be made under that statute for a taxable year beginning on or after January 1, 1995, and before January 1, 1996, with respect to an underpayment of corporation income tax to the extent the underpayment was created or increased by this act.
Sec. 7.  Sections 1, 2, 3, and 6 of this act are effective for taxable years beginning on or after January 1, 1995.  Section 4 of this act becomes effective July 1, 1995, and applies to sales made on or after that date.  Section 5 of this act becomes effective July 1, 1995, and applies to certificates of title issued on or after that date.  The remainder of this act is effective upon ratification.