A BILL TO BE ENTITLED
AN ACT to create new jobs by recruiting new businesses, growing existing businesses, and encouraging entrepreneurs.
The General Assembly of North Carolina enacts:
part 1.  REDUCE CORPORATE INCOME TAX
SECTION 1.1.  G.S. 105‑130.3 reads as rewritten:
"§ 105‑130.3.  Corporations.
(a)	Tax. – A tax is imposed on the State net income of every C Corporation doing business in this State. An S Corporation is not subject to the tax levied in this section. The tax is a percentage of the taxpayer's State net income computed as follows: 
Income Years Beginning	Tax
In 1997	7.5%
In 1998	7.25%
In 1999	7%
After 1999	6.9%.
(b)	Exemption. – Before computing the tax in subsection (a) of this section, a C Corporation may subtract from State net income the applicable exemption amount. If the corporation is not required to apportion income to this State, the applicable exemption amount is the amount provided in the table below based on the corporation's State net income. If the corporation is required to apportion income to this State, the applicable exemption amount is the product of the corporation's apportionment fraction determined under G.S. 105‑130.4(i) multiplied by the amount provided in the table below based on the corporation's State net income.
State Net Income		Exemption Amount
$100,000 or less	$25,000
Over $100,000 through $200,000	$15,000
Over $200,000	‑0‑"
SECTION 1.2.  G.S. 115C‑546.1(b) reads as rewritten:
"(b)	Each calendar quarter, the Secretary of Revenue shall remit to the State Treasurer for credit to the Public School Building Capital Fund an amount equal to the applicable fraction or percentage provided in the table below of the net collections received during the previous quarter by the Department of Revenue under G.S. 105‑130.3 minus two million five hundred thousand dollars ($2,500,000). All funds deposited in the Public School Building Capital Fund shall be invested as provided in G.S. 147‑69.2 and G.S. 147‑69.3.
Period	Fraction or Percentage
10/1/97 to 9/30/98	One‑fifteenth (1/15)
10/1/98 to 9/30/99	Two twenty‑ninths (2/29)
10/1/99 to 9/30/00	One‑fourteenth (1/14)
10/1/00 to 9/30/05	Five sixty‑ninths (5/69)
After 9/30/05		Seven and forty‑three one‑hundredths percent (7.43%)"
SECTION 1.3.  G.S. 105‑130.8(a)(5) reads as rewritten:
"(5)	For purposes of this section, the amount exempted under G.S. 105‑130.3(b), any income item deductible in determining State net income under G.S. 105‑130.5, and any nonapportionable income not allocable to this State under the provisions of G.S. 105‑130.4 are considered as income not taxable under this Part. The amount of the income item considered income not taxable under this Part is determined after subtracting related expenses for which a deduction was allowed under this Part."
SECTION 1.4.  Section 1.1 and Section 1.3 of this part become effective for taxable years beginning on or after January 1, 2005. The remainder of this part is effective when it becomes law.
part 2.  reserved
part 3.  sales tax refunds AND EXEMPTIONS
SECTION 3.1.  G.S. 105‑164.14(j) reads as rewritten:
"(j)	Certain Industrial Facilities. – The owner of an eligible facility is allowed an annual refund of sales and use taxes as provided in this subsection.
(1)	Refund. – The owner of an eligible facility is allowed an annual refund of sales and use taxes paid by it under this Article on building materials, building supplies, fixtures, and equipment that become a part of the real property of the eligible facility. Liability incurred indirectly by the owner for sales and use taxes on these items is considered tax paid by the owner. A request for a refund must be in writing and must include any information and documentation required by the Secretary. A request for a refund is due within six months after the end of the State's fiscal year. Refunds applied for after the due date are barred.
(2)	Eligibility. – A facility is eligible under this subsection if it meets both of the following conditions:
a.	It is primarily engaged in one of the industries listed in this subsection.
b.	The Secretary of Commerce has certified that the owner of the facility will invest at least the required amount of private funds to construct the facility in this State. For the purpose of this subsection, costs of construction may include costs of acquiring and improving land for the facility and costs of equipment for the facility. If the facility is located in an enterprise tier one, two, or three area as defined in G.S. 105‑129.3, the required amount is fifty million dollars ($50,000,000). For all other facilities, the required amount is one hundred million dollars ($100,000,000).
(3)	Industries. – This subsection applies to the following industries:
a.	Aircraft manufacturing. Aircraft manufacturing means manufacturing or assembling complete aircraft.
b.	Bioprocessing. Bioprocessing means biomanufacturing or processing that includes the culture of cells to make commercial products, the purification of biomolecules from cells, or the use of these molecules in manufacturing.
c.	Motor vehicle manufacturing. Motor vehicle manufacturing means any of the following:
1.	Manufacturing complete automobiles and light‑duty motor vehicles.
2.	Manufacturing heavy‑duty truck chassis and assembling complete heavy‑duty trucks, buses, heavy‑duty motor homes, and other special purpose heavy‑duty motor vehicles for highway use.
3.	Manufacturing complete military armored vehicles, nonarmored military universal carriers, combat tanks, and specialized components for combat tanks.
d.	Pharmaceutical and medicine manufacturing and distribution of pharmaceuticals and medicines. Pharmaceutical and medicine manufacturing means any of the following:
1.	Manufacturing biological and medicinal products. For the purpose of this sub‑subdivision, a biological product is a preparation that is synthesized from living organisms or their products and used medically as a diagnostic, preventive, or therapeutic agent. For the purpose of this sub‑subdivision, bacteria, viruses, and their parts are considered living organisms.
2.	Processing botanical drugs and herbs by grading, grinding, and milling.
3.	Isolating active medicinal principals from botanical drugs and herbs.
4.	Manufacturing pharmaceutical products intended for internal and external consumption in forms such as ampoules, tablets, capsules, vials, ointments, powders, solutions, and suspensions.
e.	Semiconductor manufacturing. Semiconductor manufacturing means development and production of semiconductor material, devices, or components.
(4)	Forfeiture. – If the owner of an eligible facility does not make the required minimum investment within five years after the first refund under this subsection with respect to the facility, the facility loses its eligibility and the owner forfeits all refunds already received under this subsection. Upon forfeiture, the owner is liable for tax under this Article equal to the amount of all past taxes refunded under this subsection, plus interest at the rate established in G.S. 105‑241.1(i), computed from the date each refund was issued. The tax and interest are due 30 days after the date of the forfeiture. A person that fails to pay the tax and interest is subject to the penalties provided in G.S. 105‑236."
SECTION 3.2.  G.S. 105‑164.13 reads as rewritten:
"§ 105‑164.13.  Retail sales and use tax.
The sale at retail and the use, storage, or consumption in this State of the following tangible personal property and services are specifically exempted from the tax imposed by this Article:
…
(1)	Commercial fertilizer, lime, land plaster, plastic mulch, plant bed covers, and seeds sold to a farmer for agricultural purposes.
…
(45)	Sales to an interstate air business, or to a person that leases commercial aircraft to an interstate air business, of tangible personal property that becomes a component part of or is dispensed as a lubricant into commercial aircraft during its maintenance, repair, or overhaul. For the purpose of this subdivision, commercial aircraft includes only aircraft that has a certified maximum take‑off weight of more than 12,500 pounds and is regularly used to carry for compensation passengers, commercial freight, or individually addressed letters and packages. 
…
(49a)	Delivery charges for delivery of direct mail if the charges are separately stated on an invoice or similar billing document given to the purchaser.
…
(53)	Sales to a professional land surveyor of tangible personal property on which custom aerial survey data is stored in digital form or is depicted in graphic form. Data is custom if it was created to the specifications of the professional land surveyor purchasing the property. A professional land surveyor is a person licensed as a surveyor under Chapter 89C of the General Statutes."
SECTION 3.3.  G.S. 105‑164.3 is amended by adding two new subdivisions to read:
"(14c)	Interstate air business. – An interstate air courier, an interstate freight air carrier, or an interstate passenger air carrier.
…
(15b)	Interstate freight air carrier. – A person whose primary business is scheduled freight air transportation, as defined in the North American Industry Classification System adopted by the United States Office of Management and Budget, in interstate commerce."
SECTION 3.4.  The amendment to G.S. 105‑164.14(j)(2) made by this part is effective on and after January 1, 2004, and applies to sales made on or after that date. Sections 3.2, 3.3, and 3.4 of this part become effective October 1, 2004, and apply to sales made on or after that date. The remainder of this part becomes effective July 1, 2004, and applies to sales made on or after that date.
part 4.  qualified business investment credit
SECTION 4.1.  G.S. 105‑163.012(b) reads as rewritten:
"(b)	The total amount of all tax credits allowed to taxpayers under G.S. 105‑163.011 for investments made in a calendar year may not exceed nine million dollars ($9,000,000). The Secretary of Revenue shall calculate the total amount of tax credits claimed from the applications filed pursuant to G.S. 105‑163.011(c). If the total amount of tax credits claimed for investments made in a calendar year exceeds this maximum amount, the Secretary shall allow a portion of the credits claimed by allocating the maximum amount in tax credits in proportion to the size of the credit claimed by each taxpayer."
SECTION 4.2.  G.S. 105‑163.015 reads as rewritten:
"§ 105‑163.015.  Sunset.
This Part is repealed effective for investments made on or after January 1, 2009."
SECTION 4.3.  This part becomes effective for investments made on or after January 1, 2004.
PART 5.  RESEARCH AND DEVELOPMENT TAX CREDIT
SECTION 5.1.  G.S. 105‑129.10 is amended by adding a new subsection to read:
"(d)	The credits allowed in this section and the credit allowed in Article 3F of this Chapter are exclusive. A taxpayer may elect to take only one of the three credits with respect to its research activities in a taxable year."
SECTION 5.2.  Chapter 105 of the General Statutes is amended by adding a new Article to read:
"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)	North Carolina university research expenses. – Any amount paid or incurred to a research university for qualified research performed in this State or basic research performed in this State.
(5)	Period of measurement. – Defined in the Small Business Size Regulations of the federal Small Business Administration.
(6)	Qualified North Carolina research expenses. – Qualified research expenses for research performed in this State.
(7)	Receipts. – Defined in the Small Business Size Regulations of the federal Small Business Administration.
(8)	Related person. – Defined in G.S. 105‑163.010. 
(9)	Research university. – An institution of higher education that meets one or both of the following conditions:
a.	It is classified as one of the following in the most recent edition of 'A Classification of Institutions of Higher Education', the official report of The Carnegie Foundation for the Advancement of Teaching:
1.	Doctoral/Research Universities, Extensive or Intensive.
2.	Masters Colleges and Universities, I or II.
3.	Baccalaureate Colleges, Liberal Arts or General.
b.	It is a constituent institution of The University of North Carolina.
(10)	Small business. – A business whose annual receipts, combined with the annual receipts of all related persons, for the applicable period of measurement did not exceed one million dollars ($1,000,000).
"§ 105‑129.51. Administration; sunset.
(a)	A taxpayer is eligible for the credit allowed in this Article if it satisfies the requirements of G.S. 105‑129.4(b), (b2), (b3), and (b4) relating to wage standard, health insurance, environmental impact, and safety and health programs, respectively.
(b)	This Article is repealed for taxable years beginning on or after January 1, 2014.
(c)	The credit allowed in this Article and the credits allowed in G.S. 105‑129.10 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 different expenses in a subsequent taxable year.
"§ 105‑129.52. Tax election; cap.
(a)	Tax Election. – The credit allowed in this Article is 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 credit is first 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 December 31:
(1)	The number of taxpayers that claimed a credit allowed in this Article, itemized by the categories of small business, low‑tier, other, and university research.
(2)	The amount of each credit claimed in each category. 
(3)	The total cost to the General Fund of the credits claimed.
"§ 105‑129.55.  Credit for North Carolina research and development.
(a)	Qualified North Carolina Research Expenses. – A taxpayer that has qualified North Carolina research expenses for the taxable year is allowed a credit equal to a percentage of the expenses, determined as provided in this subsection. If part of the taxpayer's qualified North Carolina research expenses qualifies under subdivision (2) of this subsection and the remainder qualifies under subdivision (3) of this subsection, the applicable percentages apply separately to each part of the expenses.
(1)	Small business. – If the taxpayer was a small business as of the last day of the taxable year, the applicable percentage is three percent (3%).
(2)	Low‑tier research. – For expenses with respect to research performed in an enterprise tier one, two, or three area, the applicable percentage is three percent (3%).
(3)	Other research. – For expenses not covered under subdivision (1) or (2) of this subsection, the percentages provided in the table below apply to the taxpayer's qualified North Carolina research expenses during the taxable year at the following levels:
Expenses Over	Up To	Rate
‑0‑	$50 million	1%
$50 million	$200 million	2%
$200 million	 – 	3%
(b)	North Carolina University Research Expenses. – A taxpayer that has North Carolina university research expenses for the taxable year is allowed a credit equal to fifteen percent (15%) of the expenses."
SECTION 5.3.  G.S. 105‑259(b) is amended by adding a new subdivision to read:
"(b)	Disclosure Prohibited. – An officer, an employee, or an agent of the State who has access to tax information in the course of service to or employment by the State may not disclose the information to any other person unless the disclosure is made for one of the following purposes:
…
(30)	To publish the information required under G.S. 105‑129.55 and to prove that a business does not meet the definition of 'small business' under Article 3F of this Chapter because the annual receipts of the business, combined with the annual receipts of all related persons, exceeds the applicable amount."
SECTION 5.4.  This part becomes effective for taxable years beginning on or after January 1, 2005.
part 6.  Escheat Fund Investments
SECTION 6.1.  G.S. 147‑69.2(b) reads as rewritten:
"(b)	It shall be the duty of the State Treasurer to invest the cash of the funds enumerated in subsection (a) of this section in excess of the amount required to meet the current needs and demands on such funds, selecting from among the following:
. . .
(11)	With respect to assets of the Escheat Fund, notwithstanding the provisions of Chapter 116B of the General Statutes, obligations of the North Carolina Global TransPark Authority authorized by G.S. 63A‑4(a)(22), not to exceed twenty‑five million dollars ($25,000,000), that have a final maturity not later than September 1, 2004. The obligations shall bear interest at the rate set by the State Treasurer. No commitment to purchase obligations may be made pursuant to this subdivision after September 1, 1993, and no obligations may be purchased after September 1, 1994. In the event of a loss to the Escheat Fund by reason of an investment made pursuant to this subdivision, it is the intention of the General Assembly to hold the Escheat Fund harmless from the loss by appropriating to the Escheat Fund funds equivalent to the loss.
(12)	With respect to assets of the Escheat Fund and the Escheat Account, notwithstanding the provisions of Chapter 116B of the General Statutes, the following investments, not to exceed the greater of one hundred million dollars ($100,000,000) or twenty percent (20%) of the total combined value of the Escheat Fund and the Escheat Account at the time the investment is made:
a.	Limited partnership interests in a partnership, interests in a limited liability company, or stock in a corporation, if the primary purpose of the partnership, limited liability company, or corporation is to invest in public or private debt, public or private equity, or corporate buyout transactions within or outside the United States.
b.	Obligations guaranteed in whole or in part by the Small Business Administration to businesses in North Carolina. Investment in the obligations of a single business and its affiliates under this sub‑subdivision is limited to two hundred fifty thousand dollars ($250,000) in the aggregate.
c.	Issuing letters of credit to provide credit enhancements for loans made by banks to businesses in North Carolina, not to exceed in the aggregate the greater of twenty‑five million dollars ($25,000,000) or five percent (5%) of the total combined value of the Escheat Fund and the Escheat Account at the time the letter is issued.
	In exercising fiduciary duty to evaluate possible investments under this subdivision, the State Treasurer may consider, without diminishing the obligation to invest funds for the benefit of worthy and needy students, the potential economic benefits to the State of such an investment. The State Treasurer shall report to the General Assembly annually regarding the investments made under this subdivision."
SECTION 6.2.  This part is effective when it becomes law.
PART 7.  INSURABLE INTEREST OF CHARITABLE ORGANIZATIONS
SECTION 7.1.  G.S. 58-58-86 reads as rewritten:
"§ 58‑58‑86.  Insurable interest of charitable organizations.
(a)	If an organization described in section 501(c)(3) of the Internal Revenue  Code, or an entity, purchases or receives by assignment, before, on, or after the effective date of this section, life insurance on an insured who consents in writing to the purchase or assignment, the organization or entity is deemed to have an insurable interest in the insured person's life.
(b)	For the purposes of this section, an "entity" is any trust, business trust, partnership, corporation, limited liability company, or similar entity approved in writing by the insured as the beneficiary in, and owner of, a life insurance policy and annuity contract on the life of the insured subject to each of the following requirements:
(1)	The entity is formed for the purpose, in part, of generating funds for the benefit of one or more charitable organizations described in section 501(c)(3) of the Internal Revenue Code that are, prior to the time of the purchase, designated in writing by the consenting insured.
(2)	The payments to the entity under the annuity contracts must be reasonably anticipated to fund the premiums on the life insurance policies for the second and succeeding years.
(3)	Either (i) each benefited charitable organization described in section 501(c)(3) of the Internal Revenue Code that is designated in writing by the consenting insured provides an affidavit to the entity stating that the organization has been in existence for at least three years and has assets of at least five million dollars ($5,000,000) or (ii) the consenting insured provides an affidavit to the entity stating that the insured is an accredited investor as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended.
(4)	The consenting insured provides an affidavit to the entity stating that neither the consenting insured, any relative, as that term is defined in G.S. 39-23.1(11), of the consenting insured, nor any entity controlled by the consenting insured or any relative of the consenting insured other than a charitable organization described in section 501(c)(3) of the Internal Revenue Code, received any monetary remuneration or other consideration whatsoever in connection with the consenting insured's consent to purchase the combination of a life insurance policy and annuity contract.
(5)	Prior to the ownership or purchase of the combination of a life insurance policy and annuity contract on the consenting insured, each consenting insured and benefited organization described in section 501(c)(3) of the Internal Revenue Code is provided a written description of the minimum percentage or amount of the life insurance proceeds that is reasonably anticipated to be paid to the benefited charitable organization."
SECTION 7.2.  This part is effective when it becomes law.
Part 8.  Effective date
SECTION 8.  Except as otherwise provided in this act, this act is effective when it becomes law.