A BILL TO BE ENTITLED
AN ACT to raise the excise tax on cigarettes; to streamline the taxation of liquor and change the distribution of excise taxes on alcohol; and to phase out THE COUNTY share OF MEDICAID costs.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 105‑113.5 reads as rewritten:
"§ 105‑113.5.  Tax on cigarettes.
A tax is levied on the sale or possession for sale in this State, by a distributor, of all cigarettes at the rate of three cents (3¢) per individual cigarette.
This tax does not apply to any of the following:
(1)	Sample cigarettes distributed without charge in packages containing five or fewer cigarettes.
(2)	Cigarettes in a package of cigarettes given without charge by the manufacturer of the cigarettes to an employee of the manufacturer who works in a factory where cigarettes are made, if the cigarettes are not taxed by the federal government."
SECTION 2.1.  G.S. 18B‑804(b) reads as rewritten:
"(b)	Sale Price of Spirituous Liquor. – The sale of spirituous liquor sold at the uniform State price shall consist of the following components:
(1)	The distiller's price.
(2)	The freight and bailment charges of the State warehouse as determined by the Commission.
(3)	A markup for local boards as determined by the Commission.
(4)	The tax levied under G.S. 105‑113.80(c), which shall be levied on the sum of subdivisions (1), (2), and (3).
		(6a)	The bailment surcharge.
	(7)	A rounding adjustment, the formula of which may be determined by the Commission, so that the sale price will be divisible by five.
		"
SECTION 2.2.  G.S. 18B‑805 reads as rewritten:
"§ 18B‑805.  Distribution of revenue.
(a)	Gross Receipts. – As used in this section, "gross receipts" means all revenue of a local board, including proceeds from the sale of alcoholic beverages, investments, interest on deposits, and any other source.
(b)	Primary Distribution. – Before making any other distribution, a local board shall first pay the following from its gross receipts:
(1)	The board shall pay the expenses, including salaries, of operating the local ABC system.
(2)	Each month the local board shall pay to the Department of Revenue the taxes due the Department. 
		(c)	Other Statutory Distributions. – After making the distributions required by subsection (b), a local board shall make the following quarterly distributions from the remaining gross receipts:
	(2)	The local board shall spend for law enforcement an amount set by the board which shall be at least five percent (5%) of the remaining gross receipts. The local board may contract with the ALE Division to provide the law enforcement required by this subdivision. Notwithstanding the provisions of any local act, this provision shall apply to all local boards.
(3)	The local board shall spend, or pay to the county commissioners to spend, for the purposes stated in subsection (h), an amount set by the board which shall be at least seven percent (7%) of the remaining gross receipts. This provision is not applicable to a local board that is subject to a local act setting a different distribution.
(d)	Working Capital. – After making the distributions provided for in subsections (b) and (c), the local board may set aside a portion of the remaining gross receipts, within the limits set by the rules of the Commission, as cash to operate the ABC system. With the approval of the appointing authority for the board, the local board may also set aside a portion of the remaining gross receipts as a fund for specific capital improvements.
(e)	Other Distributions. – After making the distributions provided in subsections (b), (c), and (d), the local board shall pay each quarter the remaining gross receipts to the general fund of the city or county for which the board is established, unless some other distribution or some other schedule is provided for by law. If the governing body of each city and county receiving revenue from an ABC system agrees, those governing bodies may alter at any time the distribution to be made under this subsection or under any local act. Copies of the governing body resolutions agreeing to a new distribution formula and a copy of the approved new distribution formula shall be submitted to the Commission for review and audit purposes. If any one of the governing bodies later withdraws its consent to the change in distribution, profits shall be distributed according to the original formula, beginning with the next quarter.
	(g)	Quarterly Distributions. – When this section requires a distribution to be made quarterly, at least ninety percent (90%) of the estimated distribution shall be paid to the recipient by the local board within 30 days of the end of that quarter. Adjustments in the amount to be distributed resulting from the closing of the books and from audit shall be made with the next quarterly payment.
(h)	Expenditure of Alcoholism Funds. – Funds distributed under subdivision (c)(3) of this section shall be spent for the treatment of alcoholism or substance abuse, or for research or education on alcohol or substance abuse. The minutes of the board of county commissioners or local board spending funds allocated under this subsection shall describe the activity for which the funds are to be spent. Any agency or person receiving funds from the county commissioners or local board under this subsection shall submit an annual report to the board of county commissioners or local board from which funds were received, describing how the funds were spent.
(i)	Calculation of Statutory Distributions When Liquor Sold at Less Than Uniform Price. – If a local board sells liquor at less than the uniform State price, distributions required by subsections (b) and (c) shall be calculated as though the liquor was sold at the uniform price."
SECTION 2.3.  G.S. 18B‑600(e4)(3) reads as rewritten:
"(e4)	Multicounty/City ABC Elections. – If a city is located in two or more counties, the following provisions shall apply:
…
(3)	If an election is held by a city under this subsection, all of the city voters may vote in the election. If the vote is for approval, alcoholic beverages may be sold on the basis of that approval and under the provisions of this Chapter. If the sale of mixed beverages is approved, the mixed beverage permittees shall purchase their liquor from one or more ABC stores located within the city that have been designated by the local boards for those purchases. The remaining gross receipts shall be distributed in accordance with existing law applicable to those ABC stores."
SECTION 2.4.  G.S. 105‑113.106 reads as rewritten:
"§ 105‑113.106. Definitions.
The following definitions apply in this Article:
(1)	Controlled Substance. – Defined in G.S. 90‑87.
(2)	Repealed by Session Laws 1995, c. 340, s. 1.
(3)	Dealer. – Any of the following:
a.	A person who actually or constructively possesses more than 42.5 grams of marijuana, seven or more grams of any other controlled substance that is sold by weight, or 10 or more dosage units of any other controlled substance that is not sold by weight.
b.	A person who in violation of Chapter 18B of the General Statutes possesses illicit spirituous liquor for sale.
c.	A person who in violation of Chapter 18B of the General Statutes possesses mash.
	(4)	Repealed by Session Laws 1995, c. 340, s. 1.
	(4b)	Illicit spirituous liquor. – Spirituous liquor, as defined in G.S. 105‑113.68, not authorized by the North Carolina Alcoholic Beverage Control Commission. Some examples of illicit spirituous liquor are the products known as "bootleg liquor", "moonshine", "non‑tax‑paid liquor", and "white liquor".
(4c)	Local law enforcement agency. – A municipal police department, a county police department, or a sheriff's office.
(4d)	Low‑street‑value drug. – Any of the following controlled substances:
a.	An anabolic steroid as defined in G.S. 90‑91(k).
b.	A depressant described in G.S. 90‑89(4), 90‑90(4), 90‑91(b), or 90‑92(a).
c.	A hallucinogenic substance described in G.S. 90‑89(3) or G.S. 90‑90(5).
d.	A stimulant described in G.S. 90‑89(5), 90‑90(3), 90‑91(j), 90‑92(a)(3), or 90‑93(a)(3).
e.	A controlled substance described in G.S. 90‑91(c), (d), or (e), 90‑92(a)(3), or (a)(5), or 90‑93(a)1.
(5)	Repealed by Session Laws 1995, c. 340, s. 1.
(6)	Marijuana. – All parts of the plant of the genus Cannabis, whether growing or not; the seeds of this plant; the resin extracted from any part of this plant; and every compound, salt, derivative, mixture, or preparation of this plant, its seeds, or its resin.
(6a)	Mash. – The fermentable starchy mixture from which spirituous liquor can be distilled.
(7)	Person. – Defined in G.S. 105‑228.90.
(8)	Secretary. – Defined in G.S. 105‑228.90.
(8a)	State law enforcement agency. – Any State agency, force, department, or unit responsible for enforcing criminal laws.
(9)	Unauthorized substance. – A controlled substance, illicit spirituous liquor, or mash."
SECTION 2.5.  G.S. 105‑113.107(d) is repealed.
SECTION 2.6.  G.S. 105‑113.108(b)(4) is repealed.
SECTION 2.7.  G.S. 105‑113.80(c) reads as rewritten:
"(c)	Liquor. – An excise tax of thirty-six percent (36%) is levied on liquor sold in ABC stores. Pursuant to G.S. 18B‑804(b), the price of liquor on which this tax is computed is the distiller's price plus (i) the State ABC warehouse freight and bailment charges, and (ii) a markup for local ABC boards."
SECTION 2.8.  Part 4 of Article 2C of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-113.81B.  Distribution of part of liquor taxes.
The Secretary shall on a quarterly basis credit to the Department of Health and Human Services seven-tenths percent (0.7%) of the net proceeds of the excise tax collected on liquor during the previous quarter. The Department of Health and Human Services shall spend those funds for the treatment of alcoholism or substance abuse, or for research or education on alcoholism or substance abuse."
SECTION 2.9.  G.S. 105‑113.82 reads as rewritten:
"§ 105‑113.82.  Distribution of part of taxes.
(a)	Amount, Method. – The Secretary shall distribute annually the following percentages of the net amount of excise taxes collected under this Article during the preceding 12‑month period ending March 31, less the amount of the net proceeds credited to the Department of Agriculture and Consumer Services under G.S. 105‑113.81A and to the Department of Health and Human Services under G.S. 105‑113.81B, to the counties and cities in which the retail sale of these beverages is authorized in the entire county or city:
		
	(4)	In counties or cities in which an ABC system is established, fifteen percent (15%).
(5)	In counties or cities in which an ABC system is not established but in which sales of malt beverages, unfortified wine, or fortified wine are allowed, five percent (5%).
If liquor, malt beverages, unfortified wine, or fortified wine may be licensed to be sold at retail in both a county and a city located in the county, both the county and city shall receive a portion of the amount distributed, that portion to be determined on the basis of population. If one of these beverages may be licensed to be sold at retail in a city located in a county in which the sale of the beverage is otherwise prohibited, only the city shall receive a portion of the amount distributed, that portion to be determined on the basis of population. The amounts distributed under subdivisions (4) and (5) shall be computed separately.
(b)	Repealed by Session Laws 2000, c. 173, s. 3, effective August 2, 2000.
(c)	Exception. – Notwithstanding subsection (a), in a county in which ABC stores have been established by petition, the revenue shall be distributed as though the entire county had approved the retail sale of a beverage whose retail sale is authorized in part of the county.
(d)	Time. – The revenue shall be distributed to cities and counties within 60 days after March 31 of each year. The General Assembly finds that the revenue distributed under this section is local revenue, not a State expenditure, for the purpose of Section 5(3) of Article III of the North Carolina Constitution. Therefore, the Governor may not reduce or withhold the distribution.
(e)	Population Estimates. – To determine the population of a city or county for purposes of the distribution required by this section, the Secretary shall use the most recent annual estimate of population certified by the State Planning Officer.
(f)	City Defined. – As used in this section, the term "city" means a city as defined in G.S. 153A‑1(1) or an urban service district defined by the governing body of a consolidated city‑county.
(g)	Use of Funds. – Funds distributed to a county or city under this section may be used for any public purpose.
(h)	Disqualification. – No municipality may receive any funds under this section if it was incorporated with an effective date of on or after January 1, 2000, and is disqualified from receiving funds under G.S. 136‑41.2. No municipality may receive any funds under this section, incorporated with an effective date on or after January 1, 2000, unless a majority of the mileage of its streets are open to the public. The previous sentence becomes effective with respect to distribution of funds on or after July 1, 1999."
SECTION 3.  Notwithstanding any other provision of law to the contrary, effective July 1, 2003, the State shall pay one hundred percent (100%) of the nonfederal share of nonadministrative costs under the Medical Assistance Program for all counties that were designated as enterprise tier one or two for 2003.  Effective July 1, 2004, the State shall pay one hundred percent (100%) of the nonfederal share of nonadministrative costs under the Medical Assistance Program for all counties that were designated as enterprise tier one, two, or three for 2003.  Effective July 1, 2005, the State shall pay one hundred percent (100%) of the nonfederal share of nonadministrative costs under the Medical Assistance Program for all counties.  For the purposes of this section, "enterprise tier" has the same meaning as under G.S. 105‑129.2.
SECTION 4.  G.S. 108A‑54 reads as rewritten:
"§ 108A‑54.  Authorization of Medical Assistance Program.
The Department is authorized and empowered to establish a Medical Assistance Program from federal and State appropriations and to adopt rules and regulations under which payments are to be made in accordance with the provisions of this Part. "
SECTION 5.  Sections 2.1 through 2.9 of this act become effective November 1, 2003.  Section 4 of this act becomes effective July 1, 2005.  The remainder of this act becomes effective July 1, 2003.