A BILL TO BE ENTITLED
AN ACT TO REPEAL THE BILL LEE ACT AND REPLACE IT WITH MORE EFFECTIVE INCENTIVES TO BRING PROSPERITY TO DISTRESSED AREAS OF THE STATE.
The General Assembly of North Carolina enacts:
SECTION 1.  The General Assembly finds as follows:
(1)	One of the primary objectives of the William S. Lee Act when it was enacted in 1996 was to encourage relatively more private investment and job growth in poorer and struggling rural areas of the State. This intent was extended to disadvantaged urban centers with the inclusion of the development zone incentives.
(2)	Over the years, the Act has been expanded and refined and has received increasing funding, but it has remained focused on this key objective.
(3)	The evidence clearly indicates that the large majority of investment and job creation credits are taken by companies locating in prosperous urban areas. This suggests that most of the credits represent a State subsidy for location decisions that would have been made in the absence of the Bill Lee Act.
(4)	The annual cost to the State of the Bill Lee Act and related incentives that have been adopted since 1996 amounts to one hundred forty-two million dollars ($142,000,000). These funds have become more precious as the State faces the most severe fiscal crisis in over five decades.
(5)	The shift of North Carolina jobs to other countries that has begun in the last few years continues to spread from traditional manufacturing sectors to other manufacturing and to information processing. This trend shows no signs of abating as companies continue to strive to reduce labor costs.
(6)	The movement of jobs to other countries has had a severe impact on certain industrial counties in the Piedmont and some small communities in the rural areas of the State. The lack of replacement employment opportunities will limit the careers of displaced workers in these counties, even with retraining efforts. In many cases, the current Bill Lee Act economic distress determination does not take into account these situations on a timely basis.
(7)	This act is designed to address these issues by making the following changes:
a.	Retaining those parts of the William S. Lee Act that are beneficial and effective.
b.	Replacing the remaining parts of the William S. Lee Act with a program designed to address the unique challenges raised by current economic trends.
c.	Providing a superior method for identifying the areas of relative economic health versus distress.
d.	Better targeting the State's economic development dollars to projects that would not otherwise locate or expand without an incentive.
e.	Providing a performance management information system that will allow the State to continually assess and evaluate its economic development tools and adjust them to reflect ongoing changes in the economy.
(8)	This act is necessary to stimulate the economy, facilitate economic recovery, and create new jobs in North Carolina. This act 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.
SECTION 2.  G.S. 105‑129.2A(a) reads as rewritten:
"(a)	Sunset. – G.S. 105‑129.9A is repealed effective for business activities that occur on or after January 1, 2006. Except as provided in subsection (a1) of this section, the remainder of this Article is repealed effective for business activities that occur on or after January 1, 2004."
SECTION 3.  Chapter 105 of the General Statutes is amended by adding a new Article 3F entitled "Research and Development."
SECTION 4.(a)  The following statutes in Article 3 of Chapter 105 of the General Statutes are amended as follows:
(1)	G.S. 105‑129.3 is recodified as G.S. 143B‑437.5.
(2)	G.S. 105‑129.3A is recodified as G.S. 143B‑437.6.
(3)	G.S. 105‑129.10(a) is recodified as G.S. 105‑129.55.
(4)	G.S. 105‑129.10(b) is recodified as G.S. 105‑129.56.
(5)	G.S. 105‑129.10(c) is repealed.
SECTION 4.(b)  The Revisor of Statutes is authorized to change cross‑references to these provisions wherever they may be found in the General Statutes in order to reflect the recodification.
SECTION 5.  Part 2B of Chapter 143B of the General Statutes, as amended by this act, reads as rewritten:
"Part 2B. Economic Development Definitions and Standards.
"§ 143B‑437.4.  Reserved.
"§ 143B‑437.5. Enterprise tier designation.
(a)	Tiers Defined. – An enterprise tier one area is a county whose enterprise factor is one of the 10 highest in the State. An enterprise tier two area is a county whose enterprise factor is one of the next 15 highest in the State. An enterprise tier three area is a county whose enterprise factor is one of the next 25 highest in the State. An enterprise tier four area is a county whose enterprise factor is one of the next 25 highest in the State. An enterprise tier five area is any area that is not in a lower‑numbered enterprise tier.
(b)	Ranking. – Each year, on or before December 31, the Secretary of Commerce shall assign to each county in the State an enterprise factor that is the sum of the following:
(1)	The county's rank in a ranking of counties by average rate of unemployment from lowest to highest, for the most recent 12‑month period for which data are available.
(2)	The county's rank in a ranking of counties by average per capita income from highest to lowest, for the preceding three years.
(3)	The county's rank in a ranking of counties by percentage growth in population from highest to lowest.
(c)	Annual Designation. – The Secretary of Commerce shall then rank all the counties within the State according to their enterprise factor from highest to lowest, identify all the areas of the State by enterprise tier, and publish this information. An enterprise tier designation is effective only for the calendar year following the designation.
(d)	Data. – In measuring rates of unemployment and per capita income, the Secretary shall use the latest available data published by a State or federal agency generally recognized as having expertise concerning the data. In measuring population and population growth, the Secretary shall use the most recent estimates of population certified by the State Planning Officer.
(e)	Exception for Enterprise Tier One and Two Areas. – Notwithstanding the provisions of this section, a county designated as an enterprise tier one area or an enterprise tier two area may not be redesignated as a higher‑numbered enterprise tier area until it has been in its enterprise tier area for at least two consecutive years.
(f)	Exception for Two‑County Industrial Park. – For the purpose of this Part, an eligible two‑county industrial park has the lower enterprise tier designation of the designations of the two counties in which it is located if it meets all of the following conditions:
(1)	It is located in two contiguous counties, one of which has a lower enterprise tier designation than the other.
(2)	At least one‑third of the park is located in the county with the lower tier designation.
(3)	It is owned by the two counties or a joint agency of the counties.
(4)	The county with the lower tier designation contributed at least the lesser of one‑half of the cost of developing the park or a proportion of the cost of developing the park equal to the proportion of land in the park located in the county with the lower tier designation.
(g)	Exceptions for Certain Small Counties. – The following exceptions to the provisions of this section apply to small counties:
(1)	A county that meets both of the conditions set out below is designated an enterprise tier one area:
a.	Its population is less than 12,000.
b.	More than sixteen percent (16%) of its population is below the federal poverty level according to the most recent federal decennial census.
(2)	A county that meets both of the conditions set out below has an enterprise tier designation one level below the designation it would otherwise have under subsection (a) of this section:
a.	Its population is less than 50,000.
b.	More than eighteen percent (18%) of its population is below the federal poverty level according to the most recent federal decennial census.
(3)	A county that has a population of less than 35,000 and that would otherwise be designated an enterprise tier four or five area under this section must be designated an enterprise tier three area.
"§ 143B‑437.6.  Development zone designation.
(a)	Development Zone Defined. – A development zone is an area comprised of one or more contiguous census tracts, census block groups, or both in the most recent federal decennial census that meets all of the following conditions:
(1)	Every census tract and census block group in the zone is located in whole or in part within the primary corporate limits of a city with a population of more than 5,000 according to the most recent annual population estimates certified by the State Planning Officer.
(2)	It has a population of 1,000 or more according to the most recent annual population estimates certified by the State Planning Officer.
(3)	More than twenty percent (20%) of its population is below the poverty level according to the most recent federal decennial census.
(4)	Every census tract and census block group in the zone meets at least one of the following conditions:
a.	More than ten percent (10%) of its population is below the poverty level according to the most recent federal decennial census.
b.	It is immediately adjacent to another census tract or census block group that is in the same zone and has more than twenty percent (20%) of its population below the poverty level according to the most recent federal decennial census.
(5)	None of the census tracts or census block groups in the zone is located in another development zone designated by the Secretary of Commerce.
(b)	Designation. – Upon request of a person or a local government, the Secretary of Commerce shall designate whether an area is a development zone that meets the conditions of subsection (a) of this section. If the applicant is a person, the applicant must notify each city in which part of the zone is located. A development zone designation is effective for 24 months following the designation. The Department of Commerce must publish annually a list of all development zones with a description of their boundaries.
(c)	Effect of Designation. – For the purpose of the wage standard provided in this Part, a development zone is considered an enterprise tier one area.
(d)	Parcel of Property Partially in a Development Zone. – For the purposes of this section, a parcel of property that is located partially within a development zone is considered entirely within the development zone if all of the following conditions are satisfied:
(1)	At least fifty percent (50%) of the parcel is located within the development zone.
(2)	The parcel was in existence and under common ownership prior to the most recent federal decennial census.
(3)	The parcel is a portion of land made up of one or more tracts or tax parcels of land that is surrounded by a continuous perimeter boundary.
"§ 143B‑437.7. Standards.
(a)	Purpose. – This section establishes various standards to be applied in the State's economic development efforts to assure that incentives are used only for high‑quality jobs that are beneficial to the citizens of the State.
(b)	Wage Standard. – No wage standard applies to activities in an enterprise tier one or two area. Activities in an enterprise tier three, four, or five area must meet the wage standard provided in this subsection.
Jobs meet the wage standard if they pay an average weekly wage that is at least equal to one hundred ten percent (110%) of the applicable average weekly wage for the county in which the jobs will be located, as computed by the Secretary of Commerce from data compiled by the Employment Security Commission for the most recent period for which data are available. The applicable average weekly wage is the lowest of the following: (i) the average wage for all insured private employers in the county, (ii) the average wage for all insured private employers in the State, and (iii) the average wage for all insured private employers in the county multiplied by the county income/wage adjustment factor. The county income/wage adjustment factor is the county income/wage ratio divided by the State income/wage ratio. The county income/wage ratio is average per capita income in the county divided by the annualized average wage for all insured private employers in the county. The State income/wage ratio is the average per capita income in the State divided by the annualized average wage for all insured private employers in the State.
The Department of Commerce must annually publish the wage standard for each county.
(c)	Health Insurance Standard. – A project meets the health insurance standard if the employer provides health insurance for all of the full‑time positions at the project location at the time an incentive is granted and during every year the incentive continues. For the purposes of this subsection, an employer 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.
(d)	Environmental Impact Standard. – A project meets the environmental impact standard only if the applicant for an incentive certifies that, at the time of the application, the applicant has no pending administrative, civil, or criminal enforcement action based on alleged significant violations of any program implemented by an agency of the Department of Environment and Natural Resources, and has had no final determination of responsibility for any significant administrative, civil, or criminal violation of any program implemented by an agency of the Department of Environment and Natural Resources within the last five years. A significant violation is a violation or alleged violation that does not satisfy any of the conditions of G.S. 143‑215.6B(d). The Secretary of Environment and Natural Resources must notify the Department of Revenue and the Department of Commerce annually of every person that currently has any of these pending actions and every person that has had any of these final determinations within the last five years.
(e)	Safety and Health Programs Standard. – A project meets the safety and health programs standard only if the applicant for an incentive certifies that, at the time of the application, at the business location with respect to which the incentive is claimed, the applicant 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. For the purposes of this subsection, 'serious violation' has the same meaning as in G.S. 95‑127. The Commissioner of Labor must notify the Department of Revenue and the Department of Commerce annually of all employers who have had these citations become final orders within the past three years.
(f)	Overdue Tax Debts. – An applicant is not eligible for an economic development incentive if, at the time of the application or at the time the applicant claims an installment of the incentive, the applicant has received a notice of an overdue tax debt and that overdue tax debt has not been satisfied or otherwise resolved."
SECTION 6.  Article 10 of Chapter 143B of the General Statutes is amended by adding a new Part to read:
"Part 2G. William S. Lee Quality Jobs Investment Grants.
"§ 143B-437.70. Definitions.
Except as otherwise provided in this section, the definitions in Part 2B of this Article and in G.S. 143B‑437.51 apply in this Part. The following definitions apply in this Part:
(1)	Agreement. – A Bill Lee agreement entered into under this Part.
(2)	Committee. – The Bill Lee Committee created in this Part.
"§ 143B-437.71. 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)	It is the purpose of this Part to carry out this policy by using State economic development resources to secure location and expansion of quality projects in the areas of the State in most need, whether due to chronic economic problems or sudden and severe dislocation.
(3)	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.
(4)	Nothing in this Part constitutes a guarantee or an assumption by the State of any debt of any business or an authorization of a pledge of the taxing power or the full faith and credit of the State.
"§ 143B-437.72. Quality Jobs Investment Grant Program.
(a)	Creation and Purpose. – There is established in the Department of Commerce the William S. Lee Quality Jobs Investment Grant Program to be administered by the Bill Lee Committee created in this Part. In order to foster job creation and investment in the economy of this State, the Committee may enter into negotiated agreements with businesses to provide grants in accordance with the provisions of this Part and may provide funding to local nonprofit or governmental economic development organizations for infrastructure and worker training projects. The purpose of this Part is to provide a more effective and efficient replacement for the tax credit incentives repealed effective January 1, 2004. The replacement must be targeted to the areas of the State most in need of incentives, as determined by the Committee. 
(b)	Evaluating Economic Distress. – This Part must be administered and interpreted in light of its purpose to bring healthy economic development to those areas of the State with the greatest economic needs. In determining the level of economic distress of an area, the Bill Lee Committee must initially evaluate the enterprise tier areas and development zones designated under Part 2B of this Article. For the purpose of applying the standards and requirements of this Part, a development zone is considered a tier one enterprise area.
The Committee may further determine the level of economic distress of an area by examining any relevant factors based on reliable data available for a census tract or larger geographic area, including the following: sudden or severe dislocation or job loss, workforce skills and educational attainment, infrastructure and other local resources, and ad valorem tax base.
(c)	Criteria. – The Committee, in consultation with the Attorney General, must develop criteria to be used with respect to grants to businesses in determining whether the conditions of this Part 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 location or expansion of the business will create net new jobs by the business and is expected to increase the size of the economic pie on a statewide basis.
(2)	The proposed project will directly benefit and create opportunities in an area of the State that the Committee identifies as experiencing high unemployment, severe job losses, persistent blight, or other economic problems as compared to other areas of the State.
(3)	The total benefits of the project to the State outweigh its costs and render the grant appropriate for the project.
(d)	Ceilings. – The maximum amount of total annual liability for grants for agreements entered into in any single calendar year may not exceed twenty‑nine million dollars ($29,000,000). No agreement may be entered into that, when considered together with other existing agreements entered into during that calendar year, could cause the State's potential total annual liability for grants entered into in that calendar year to exceed this amount. Within this ceiling, the following total annual maximums apply based on the location of the projects for which grants are made:
Tier	Maximum
1 & 2	none
3	$8,000,000
4	$6,000,000
5	$5,000,000
In addition, within the twenty‑nine million dollar ($29,000,000) ceiling, up to five million dollars ($5,000,000) may be used for projects that would otherwise not qualify based on the maximums provided in this subsection but that are located in areas of especially severe economic distress as determined by the Committee in accordance with subsection (b) of this section.
If the annual ceiling has not been reached in any year, the remaining capacity carries over to the following year and, in the following year, is not subject to any maximum based on location of the project.
(e)	Performance Management Information System. – Before entering into any agreements under this Part, the Committee must develop and implement a performance management information system that includes at least the following elements:
(1)	Establishing goals of the program.
(2)	Outlining each stage of the procedure for carrying out the goals of the program.
(3)	Identifying all information necessary for decision making at each stage to achieve the program goals.
(4)	Developing methods to collect and process comprehensive data to provide relevant, accurate information on a timely basis and in a useable form.
(5)	Establishing performance measures for predictive assessment and post decision review.
(6)	Setting a schedule for periodically measuring, analyzing, and reporting performance of the program.
"§ 143B‑437.73.  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 enterprise tier area, the location with the highest enterprise tier area designation determines the minimum number of eligible positions that must be created.
Enterprise Tier Area	Number of Eligible Positions
Tier One 	10
Tier Two 	10
Tier Three 	10
Tier Four 	20
Tier Five 	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 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 meets the health insurance standard established in Part 2B of this Article for all of the full‑time employees of the project with respect to which the grant is made. Each year that a business receives a grant under this Part, the business must provide with the submission required under G.S. 143B‑437.78 a certification that the business continues to meet the health insurance standard for all full‑time employees of the project with respect to which the grant is made. If the business ceases to meet the health insurance standard for all full‑time employees of the project with respect to which a grant is made, the Committee must amend or terminate the agreement as provided in G.S. 143B‑437.79.
(d)	Wage Standard. – In order for a business to be eligible for a grant under this Part, the average wage of all jobs at the location with respect to which a grant is made must meet the applicable wage standard set out in Part 2B of this Article. If a project is to be located at more than one location, the average wage of all jobs at a location must meet the applicable wage standard in order for that location to be included in the agreement. 
(e)	Living Wage Standard. – In order for a business to be eligible for a grant under this Part, each eligible position must meet the living wage standard. A position meets the living wage standard if it pays a wage that on an annual basis exceeds two times the federal poverty level for a family of two, based on the federal poverty guidelines established by the United States Department of Health and Human Services, as revised each April 1. The Committee may waive this requirement in enterprise tier one and two areas and in areas of especially severe economic distress as determined by the Committee based on objective factors as provided in G.S. 143B-437.72(b).
(e)	Safety and Health Programs. – In order for a business to be eligible for a grant under this Part, the business must meet the safety and health programs standard provided in Part 2B of this Article. 
(f)	Environmental Impact. – In order for a business to be eligible for a grant under this Part, the business must meet the environmental impact standard provided in Part 2B of this Article.
(g)	First Source Hiring. – In order for a business to be eligible for a grant under this Part, the business must have entered into a first source hiring contract to utilize the State employment security commission and any cooperating local agency as its first source for recruitment and referral of applicants for new and replacement employment. Under the contract, the business must allow the agency three days to refer applicants. Upon request of the business in the case of an emergency, the agency may waive the three‑day period. Under the contract, the business must interview and consider qualified candidates referred by the agency before interviewing other candidates. The term of the first source contract must be at least as long as the term of the grant agreement under this Part. The Committee may waive this requirement for projects in enterprise tier one and two areas and in areas of especially severe economic distress, as determined by the Committee based on objective factors as provided in G.S. 143B-437.72(b).
"§ 143B‑437.74.  Bill Lee Committee established.
(a)	Membership. – The Bill Lee 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)	Three members appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives.
(5)	Three members 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 vote of five or more of its nine members.
(c)	Conflict of Interest. – It is unlawful for a former member of the Committee to, 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 was awarded a grant under this Part while the former member was 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 must also make a finding as to what compensation was received by the defendant for services in violation of this section and must 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 while the former member was serving on the Committee until two years after the person's conviction under this section.
(d)	Public Notice. – The Committee must do both of the following at least 20 business days before the effective date of any criteria or amendments to criteria:
(1)	Publish the proposed criteria on the Department of Commerce's web site.
(2)	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 the notifications required by subdivisions (1) and (2) of this subsection.
(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‑437.75.  Applications; fees; reports; study.
(a)	Preapplication. – The Committee may develop a procedure to require a business to submit a pre‑application before applying for a grant under this Article. The preapplication must be in the form prescribed by the Committee and must include all information required by the Committee to make an initial screening determination of whether the project is eligible under this Article and to make any other initial determinations it considers useful to evaluate potential applicants. The Committee may impose a preapplication fee not to exceed one hundred dollars ($100.00).
(b)	Application. – To apply for a grant under this Article, a business must submit an application, under oath, to the Committee 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 during the base years and thereafter and the salaries for these positions.
(5)	An estimate of the total withholdings.
(6)	Certification that the business will provide health insurance to all full‑time employees of the project.
(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.
(c)	Application Fee. – When filing an application under this section, the business must pay the Committee a fee of five thousand dollars ($5,000). 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 to offset the costs of evaluating applications and administering this Article. The Committee may waive or refund all or part of this fee in its discretion for a project in enterprise tier one or two or in an area of severe economic distress, as determined by the Committee based on objective factors as provided in G.S. 143B‑437.72(b).
(d)	Annual Reports. – The Committee must publish a report on the William S. Lee Quality Jobs Investment Grant Program on or before April 30 of each year. The report must include the following:
(1)	A listing of each Bill Lee agreement negotiated and entered into 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 agreement, the percentage used to determine the amount of the grant, and the amount of the grant made under the agreement during that year.
(2)	An update on the status of projects under agreements entered into before the preceding calendar year.
(3)	The number and enterprise tier area of eligible positions created by projects with respect to which grants were awarded.
(4)	The wage levels of all eligible positions created by projects with respect to which grants are awarded, aggregated and listed in increments of five thousand dollars ($5,000).
(5)	The amount of new income tax revenue received from withholdings related to the projects for which grants were awarded.
(6)	The criteria developed by the Committee, in consultation with the Attorney General, to implement this Part and any changes in those criteria from the previous calendar year.
(7)	The effectiveness of the program in recruiting new and expanding businesses.
(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)	An explanation of whether the projects with respect to which agreements are entered into involve new businesses in the State or expanding existing businesses in the State.
(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)	The division and use of fees collected by the Committee under this section and under G.S. 143B‑437.78.
(e)	Quarterly Reports. – The Committee must publish a report on the William S. Lee Quality Jobs Investment Grant Program within two months of the end of each quarter. This report must include a listing of each Bill Lee agreement negotiated and entered into during the preceding quarter, including the name of the business, the cost/benefit analysis conducted by the Committee during the application process, a description of the project, and the amount of the grant expected to be made under the agreement during the current fiscal year.
(f)	Cooperation. – The Committee must provide the Speaker of the House of Representatives, the President Pro Tempore of the Senate, and the chairs of the House and Senate Committees on Finance and on Appropriations a monthly list describing the projects currently under consideration for a grant and a copy of detailed minutes of any meetings the Committee held in executive session.
(g)	Study. – The Committee must conduct a study to determine the minimum funding level required to implement the William S. Lee Quality Jobs Investment Grant Program successfully. The Committee must 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 March 1 of each year.
"§ 143B‑437.76.  Calculation of minimum and maximum grants; factors considered.
(a)	Percentage of Withholding. – 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)	Term. – The term of the grant shall not exceed 12 years starting with the first year a grant is made.
(c)	Positions. – The grant may be based only on eligible positions created during the base years, unless the Committee makes an explicit determination that the grant will also be based on additional eligible positions created during the remainder of the term of the grant.
(d)	Reduction in Tier Four and Five. – The percentage established in the agreement shall be reduced by one‑fourth for any eligible position that is located in an enterprise tier four or five area.
(e)	Combination With Other Grants. – 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.
(f)	Per Position Caps. – The amount of a grant associated with any specific eligible position may not exceed six thousand five hundred dollars ($6,500) in any year. In addition, the maximum amount provided under an agreement may not exceed thirty thousand dollars ($30,000) per eligible position over the life of the agreement. 
"§ 143B‑437.77.  Bill Lee agreement.
(a)	Terms. – Each Bill Lee agreement must 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 in the base years and later years.
(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 amend an agreement pursuant to G.S. 143B‑437.79.
(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 years.
(12)	A provision establishing the conditions under which the grant agreement may be terminated, in addition to those under G.S. 143B‑437.79, and under which grant funds may be recaptured by the Committee.
(13)	A provision stating that unless the agreement is amended or terminated pursuant to G.S. 143B‑437.79, the agreement 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 amendment or termination of the agreement under G.S. 143B‑437.79.
(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‑437.72(d).
(21)	A provision stating that any recapture of a grant and any amendment to an agreement reducing 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 must be submitted to binding arbitration.
(23)	A provision stating that the business agrees to submit to an audit at any time that the Committee requires one.
(b)	Approval of Attorney General. – The Attorney General must 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.
"§ 143B‑437.78.  Grant recipient to submit records.
(a)	No later than February 1 of each year, for the preceding grant year, every business that is awarded a grant under this Part must submit to the Committee a copy of its State and federal tax returns showing business and nonbusiness income and a report showing withholdings. Submission of this information is a condition of the business's continuation in the grant program. In addition, the business must submit to the Committee an annual payroll report showing the eligible positions that are created during the base years and the new eligible positions created during each subsequent year of the grant. When making a submission under this section, the business must pay the Committee a fee of one thousand five hundred dollars ($1,500). 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. The Committee may waive or refund all or part of this fee in its discretion for a project in an enterprise tier one or two area in an area of severe economic distress, as determined by the Committee based on objective factors.
(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.
"§ 143B‑437.79.  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 must amend the agreement to reduce the amount of the grant or the term of the agreement and may terminate the agreement. Any reduction of the grant is applicable to the grant year immediately following the grant year in which the Committee amends the agreement. 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.
(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, the Committee must 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 must 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‑437.80.  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 to the State Controller 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 must make an annual certification of this to the Committee. The Committee must verify this information and certify to the State Controller that the terms of the agreement have been met. The Committee must further certify to the State Controller the amount of a grant for which the business is eligible under the agreement. The State Controller must 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‑437.81.  Effective date and sunset.
No grant funds may be disbursed under this Article before July 1, 2005. The authority of the Committee to enter into new agreements under this Part is repealed January 1, 2010."
SECTION 7.  Article 3F of Chapter 105 of the General Statutes, as enacted by this act, 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)	through (3) Reserved.
(4)	Qualified North Carolina research expenses. – Qualified research expenses for research performed in this State.
"§ 105‑129.51.  Administration; sunset.
(a)	Administration. – A taxpayer is eligible for the credits allowed in this Article if it satisfies the requirements of G.S. 143B‑437.6(b), (c), (d), and (e) relating to wage standard, health insurance, environmental impact, and safety and health programs, respectively. The three credits allowed in this Article are exclusive. A taxpayer may elect to take only one of the three credits with respect to its research activities in a taxable year. It may elect a different credit for expenses in a subsequent taxable year.
(b)	Sunset. – This Article is repealed effective for research and development activities that occur on or after January 1, 2008.
"§ 105‑129.52.  Tax election; cap.
(a)	Tax Election. – The credits allowed in this Article are 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 first installment of the credit is 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.  Reports.
The Department of Revenue must report to the Revenue Laws Study Committee and to the Fiscal Research Division of the General Assembly by May 1 of each year the following information for the 12‑month period ending the preceding April 1:
(1)	The number of taxpayers that claimed each credit allowed in this Article.
(2)	The amount of each credit claimed. 
(3)	The total cost to the General Fund of the credits claimed.
"§ 105‑129.55.  General credit for increasing research and development.
A taxpayer that claims for the taxable year a federal income tax credit under section 41(a) of the Code for increasing research activities is allowed a credit equal to five percent (5%) of the State's apportioned share of the taxpayer's expenditures for increasing research activities. The State's apportioned share of a taxpayer's expenditures for increasing research activities is the excess of the taxpayer's qualified research expenses for the taxable year over the base amount, as determined under section 41 of the Code, multiplied by a percentage equal to the ratio of the taxpayer's qualified North Carolina research expenses for the taxable year to the taxpayer's total qualified research expenses for the taxable year.
"§ 105‑129.56.  Alternative credit for increasing research and development.
A taxpayer that claims the alternative incremental credit under section 41(c)(4) of the Code for increasing research activities is allowed a credit equal to twenty‑five percent (25%) of the State's apportioned share of the federal credit claimed. The State's apportioned share of the federal credit claimed is the amount of the alternative incremental credit the taxpayer claimed under section 41(c)(4) of the Code for the taxable year multiplied by a percentage equal to the ratio of the taxpayer's qualified North Carolina research expenses for the taxable year to the taxpayer's total qualified research expenses for the taxable year. For the purpose of this section, the amount of the alternative incremental credit claimed by a taxpayer is determined without regard to any reduction elected under section 280C(c) of the Code."
SECTION 8.(a)  Grants from the One North Carolina ‑ Industrial Recruitment Competitive Fund may be made only after the Department of Commerce has developed and implemented a performance management information system that includes at least the following elements:
(1)	Establishing goals of the program.
(2)	Outlining each stage of the procedure for carrying out the goals of the program.
(3)	Identifying all information necessary for decision making at each stage to achieve the program goals.
(4)	Developing methods to collect and process comprehensive data to provide relevant, accurate information on a timely basis and in a useable form.
(5)	Establishing performance measures for predictive assessment and postdecision review.
(6)	Setting a schedule for periodically measuring, analyzing, and reporting performance of the program.
SECTION 8.(b)  With respect to the One North Carolina ‑ Industrial Recruitment Competitive Fund, the Department of Commerce must provide the Speaker of the House of Representatives, the President Pro Tempore of the Senate, and the chairs of the House and Senate Committees on Finance and on Appropriations a monthly list describing the projects currently under consideration for a grant.
SECTION 9.  G.S. 143B‑437.52 is amended by adding a new subsection to read:
"(d)	Performance Management Information System. – Before January 1, 2004, the Committee must develop and implement a performance management information system that includes at least the following elements:
(1)	Establishing goals of the program.
(2)	Outlining each stage of the procedure for carrying out the goals of the program.
(3)	Identifying all information necessary for decision making at each stage to achieve the program goals.
(4)	Developing methods to collect and process comprehensive data to provide relevant, accurate information on a timely basis and in a useable form.
(5)	Establishing performance measures for predictive assessment and 
postdecision review.
(6)	Setting a schedule for periodically measuring, analyzing, and reporting performance of the program."
SECTION 10.  G.S. 143B‑437.53 is amended by adding the following new subsection to read:
"(f)	First Source Hiring. – In order for a business to be eligible for a grant under this Part, the business must have entered into a first source hiring contract to utilize the State Employment Security Commission and any cooperating local agency as its first source for recruitment and referral of applicants for new and replacement employment. Under the contract, the business must allow the agency three days to refer applicants. Upon request of the business in the case of an emergency, the agency may waive the three‑day period. Under the contract, the business must interview and consider qualified candidates referred by the agency before interviewing other candidates. The term of the first source contract must be at least as long as the term of the grant agreement under this Part. The Committee may waive this requirement for projects in enterprise tiers one and two and in areas of especially severe economic distress, as determined by the Committee."
SECTION 11.  G.S. 143B‑437.55 is amended by adding a new subsection to read:
"(d1)	Cooperation. – The Committee must provide the Speaker of the House of Representatives, the President Pro Tempore of the Senate, and the chairs of the House and Senate Committees on Finance and on Appropriations a monthly list describing the projects currently under consideration for a grant and a copy of detailed minutes of any meetings the Committee held in executive session."
SECTION 12.  This act becomes effective October 1, 2003.