A BILL TO BE ENTITLED
AN ACT to require state divestment from, and prohibit State Agencies from Contracting With, Companies That Boycott Israel and to amend the existing sudan and iran divestment statutes.
Whereas, boycotts and related tactics have become a tool of economic warfare that threaten the sovereignty and security of key allies and trade partners of the United States; and
Whereas, the State of Israel is the most prominent target of such boycott activity, which began with, but has not been limited to, the Arab League Boycott adopted in 1945, even before Israel's declaration of independence as the reestablished national state of the Jewish people; and
Whereas, companies that refuse to deal with United States trade partners such as Israel, or entities that do business with or in such countries, make discriminatory decisions on the basis of national origin that impair those companies' commercial soundness; and
Whereas, it is the public policy of the United States, as enshrined in several federal acts, to oppose boycotts against Israel, and Congress has concluded as a matter of national trade policy that cooperation with Israel materially benefits United States companies and improves American competitiveness; and
Whereas, Israel in particular is known for its dynamic and innovative approach in many business sectors, and, therefore, a company's decision to discriminate against Israel, Israeli entities, or entities that do business with or in Israel is an unsound business practice making such a company an unduly risky contracting partner or vehicle for investment; Now, therefore,
The General Assembly of North Carolina enacts:

PART I. DIVESTMENT FROM COMPANIES BOYCOTTING ISRAEL
SECTION 1.1.  Chapter 147 of the General Statutes is amended by adding a new Article to read:
"Article 6G.
"Divestment From Companies Boycotting Israel.
"§ 147‑86.80.  Definitions.
The following definitions apply in this Article:
(1)	Boycott Israel or boycott of Israel. – Engaging in refusals to deal, terminating business activities, or taking actions that are intended to penalize, inflict economic harm, or otherwise limit commercial relations specifically with Israel, or persons or entities doing business in Israel or in Israeli‑controlled territories. This term does not apply to decisions made for ordinary business purposes or for actions with an economic impact of less than twenty million dollars ($20,000,000) in a 12‑month period.
(2)	Company. – Any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly owned subsidiaries, majority‑owned subsidiaries, parent companies, or affiliates of those entities or business associations.
(3)	Investment. – This term has the same meaning as G.S. 147‑86.57(3).
(4)	Restricted company. – A company that appears on the list of companies that are engaged in a boycott of Israel developed by the State Treasurer under G.S. 147‑86.81(a)(1).
(5)	State agency. – Any board, commission, department, executive department, officer, institution, and any political subdivision of the State.
"§ 147‑86.81.  Prohibitions on State investment.
(a)	No more than 30 days after October 1, 2017, the State Treasurer shall adopt a policy prohibiting the North Carolina Retirement Systems or the Department of State Treasurer from investing in any company engaged in a boycott of Israel. At a minimum, the policy shall provide for the following:
(1)	List of restricted companies. – Within 120 days of adoption of the policy, the State Treasurer shall develop and make publicly available a list of companies it determines to be engaged in a boycott of Israel. In the development of this list, the State Treasurer shall use any other state lists of restricted companies pursuant to similar laws and any federal information or guidance on companies that boycott Israel and any other credible information provided by nonprofit organizations, research firms, and governmental entities, and generally publicly available information. The State Treasurer shall make every effort to avoid erroneously including a company on the list. Before finalizing an initial or updated list, the State Treasurer must do all of the following before a company is included on the list:
a.	Provide 90 days' written notice of the State Treasurer's intent to include the company on the list. The notice shall inform the company that inclusion on the list would make the company ineligible for State investment, may result in the company becoming subject to divestment by the North Carolina Retirement Systems, and may affect the company's ability to conduct business with the State and its subdivisions. The notice shall specify that the company may be removed from the list if the company ceases its engagement in a boycott of Israel.
b.	The State Treasurer shall provide a company with an opportunity to comment in writing that the company is not engaged in a boycott of Israel or has ceased its boycott of Israel. If the company demonstrates to the State Treasurer that the company has not been engaged in a boycott of Israel, the company shall not be placed on the list. If a company had been engaged in a boycott of Israel but has ceased the boycott, it must submit a written certification to the State Treasurer that the company will not reengage in a boycott of Israel for the duration of any business with the State. The State Treasurer shall keep all written certifications from restricted and previously restricted companies.
(2)	Identification of investments. – Upon completion of the initial list of restricted companies created pursuant to subdivision (1) of this subsection, the State Treasurer shall identify any restricted companies in which the North Carolina Retirement Systems has investments.
(3)	Review of restricted companies list. – The State Treasurer shall review the list of restricted companies created pursuant to subdivision (1) of this subsection on an annual basis. This updated list shall be made publicly available and any updates shall be distributed to the North Carolina Retirement Systems.
(4)	Investments prohibited. – Neither the North Carolina Retirement Systems nor the State Treasurer may invest funds with a company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in restricted investment activities.
(5)	Existing investments. – Any existing investment with a company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in restricted activities must be divested within 180 days of the adoption of the list.
(b)	Nothing in the policy or in this Article shall require the North Carolina Retirement Systems or the State Treasurer to take action unless it is determined by the State Treasurer, in good faith, that the action is consistent with the fiduciary responsibilities of the Retirement Systems and the State Treasurer.
"§ 147‑86.82.  Restrictions on contracts with the State or subdivisions of the State.
(a)	A company that is identified as a restricted company is ineligible to contract with the State or any political subdivision of the State.
(b)	Any contract entered into with a company that is identified as a restricted company at the time of contract is void ab initio.
(c)	Upon receiving information that a company that was not identified as a restricted company at the time of contract has later been identified as a restricted company, the State agency shall review the information and offer the company an opportunity to respond. If the company fails to demonstrate that the company should not have been identified as a restricted company within 90 days after notification by the State agency, then the State agency shall take action as may be appropriate and provided for by law, rule, or contract.
(d)	Contracts in existence on October 1, 2017, with restricted companies shall be allowed to expire in accordance with the terms of the contract.
"§ 147‑86.83.  Exceptions.
G.S. 147‑86.82 shall not apply to contracts valued at one thousand dollars ($1,000) or less.
"§ 147‑86.84.  Reporting.
The State Treasurer shall report to the Joint Legislative Commission on Governmental Operations annually by October 1 on information regarding investments sold, redeemed, divested, or withdrawn in compliance with this Article."
SECTION 1.2.(a)  Pursuant to G.S. 147‑69.3(g), the State Treasurer is authorized to retain the services of consultants, professional individuals, analysts, data collection firms, or other persons possessing specialized skills or knowledge necessary for the proper implementation and administration of the requirements of this act.
SECTION 1.2.(b)  This section is effective when this act becomes law.

PART II. AMEND SUDAN (DARFUR) DIVESTMENT ACT
SECTION 2.1.  G.S. 147‑86.42 reads as rewritten:
"§ 147‑86.42.  Definitions.
As used in this article, the following definitions apply:
	
(2)	"Business operations" means engaging in commerce in any form in Sudan, including by acquiring, developing, maintaining, owning, selling, possessing, leasing, or operating equipment, facilities, personnel, products, services, personal property, real property, or any other apparatus of business or commerce.
(3)	"Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly‑owned subsidiaries, majority‑owned subsidiaries, parent companies, or affiliates of such entities or business associations, that exists for profit‑making purposes.
(4)	"Complicit" means taking actions during any preceding 20‑month period which have directly supported or promoted the genocidal campaign in Darfur, including, but not limited to, preventing Darfur's victimized population from communicating with each other, encouraging Sudanese citizens to speak out against an internationally approved security force for Darfur, actively working to deny, cover up, or alter the record on human rights abuses in Darfur, or other similar actions.
	
(5a)	"Investment" means a commitment or contribution of funds or property, whatever the source, or a loan or other extension of credit. It does not include indirect beneficial ownership through index funds, commingled funds, limited partnerships, derivative instruments, or the like.
(6)	"Government of Sudan" means the government in Khartoum, Sudan, which is led by the National Congress Party (formerly known as the National Islamic Front) or any successor government formed on or after October 13, 2006 (including the coalition National Unity Government agreed upon in the Comprehensive Peace Agreement for Sudan), and does not include the regional government of southern Sudan.

(9)	"Marginalized populations of Sudan" include, but are not limited to, the portion of the population in the Darfur region that has been genocidally victimized; the portion of the population of southern Sudan victimized by Sudan's North‑South civil war; the Beja, Rashidiya, and other similarly underserved groups of eastern Sudan; the Nubian and other similarly underserved groups in Sudan's Abyei, Southern Blue Nile, and Nuba Mountain regions; and the Amri, Hamadab, Manasir, and other similarly underserved groups of northern Sudan.
(10)	"Military equipment" means weapons, arms, military supplies, and equipment that readily may be used for military purposes, including, but not limited to, radar systems or military‑grade transport vehicles; or supplies or services sold or provided directly or indirectly to any force actively participating in armed conflict in Sudan.
(11)	"Mineral extraction activities" include exploring, extracting, processing, transporting, or wholesale selling or trading of elemental minerals or associated metal alloys or oxides (ore), including gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten, uranium, and zinc, as well as facilitating such activities, including by providing supplies or services in support of such activities.
(12)	"Oil‑related activities" include, but are not limited to, owning rights to oil blocks; exporting, extracting, producing, refining, processing, exploring for, transporting, selling, or trading of oil; constructing, maintaining, or operating a pipeline, refinery, or other oil‑field infrastructure; and facilitating such activities, including by providing supplies or services in support of such activities, provided that the mere retail sale of gasoline and related consumer products shall not be considered Oil‑Related Activities.
(13)	"Power production activities" means any business operation that involves a project commissioned by the National Electricity Corporation (NEC) of Sudan or other similar Government of Sudan entity whose purpose is to facilitate power generation and delivery, including, but not limited to, establishing power‑generating plants or hydroelectric dams, selling or installing components for the project, providing service contracts related to the installation or maintenance of the project, as well as facilitating such activities, including by providing supplies or services in support of such activities.
(14)	"Public fund" means any funds held by the State Treasurer to the credit of:
a.	The Teachers' and State Employees' Retirement System.
b.	The Consolidated Judicial Retirement System.
c.	The Firemen's and Rescue Workers' Pension Fund.
d.	The Local Governmental Employees' Retirement System.
e.	The Legislative Retirement System.
f.	The Legislative Retirement Fund.
g.	The North Carolina National Guard Pension Fund.
(14a)	"Restricted business operations" means business operations that have resulted in a company becoming a restricted company.
(15)	"Restricted company" means any company that meets the criteria in sub‑subdivisions a., b., or c. below:
a.	The company has business operations that involve contracts with and/or provision of supplies or services to the Government of Sudan, to companies in which the Government of Sudan has any direct or indirect equity share, Government of Sudan‑commissioned consortiums or projects, or to companies involved in Government of Sudan‑commissioned consortiums or projects and at least one of the following conditions is satisfied:
1.	More than ten percent (10%) of the company's revenues or assets linked to Sudan involve oil‑related activities or mineral extraction activities less than seventy‑five percent (75%) of the company's revenues or assets linked to Sudan involve contracts with and/or provision of oil‑related or mineral extracting products or services to the regional government of southern Sudan or a project or consortium created exclusively by that regional government; and the company has failed to take substantial action.
2.	More than ten percent (10%) of the company's revenues or assets linked to Sudan involve power production activities; less than seventy‑five percent (75%) of the company's power production activities include projects whose intent is to provide power or electricity to the marginalized populations of Sudan; and the company has failed to take substantial action.
b.	The company is complicit in the Darfur genocide.
c.	The company supplies military equipment within Sudan, unless it clearly shows that the military equipment cannot be used to facilitate offensive military actions in Sudan or the company implements rigorous and verifiable safeguards to prevent use of that equipment by forces actively participating in armed conflict, for example, through post‑sale tracking of such equipment by the company, certification from a reputable and objective third party that such equipment is not being used by a party participating in armed conflict in Sudan, or sale of such equipment solely to the regional government of southern Sudan or any internationally recognized peacekeeping force or humanitarian organization.
Notwithstanding anything herein to the contrary, a social development company which is not complicit in the Darfur genocide shall not be considered a restricted company.
(16)	"Social development company" means a company whose primary purpose in Sudan is to provide humanitarian goods or services, including medicine or medical equipment, agricultural supplies or infrastructure, educational opportunities, journalism‑related activities, information or information materials, spiritual‑related activities, services of a purely clerical or reporting nature, food, clothing, or general consumer goods that are unrelated to oil‑related activities, mineral extraction activities, or power production activities.
(17)	"Substantial action" means adopting, publicizing, and implementing a detailed plan to cease restricted business operations within one year and to refrain from any such new business operations; undertaking significant humanitarian efforts on behalf of one or more marginalized populations of Sudan; or through engagement with the Government of Sudan, materially improving conditions for the genocidally victimized population in Darfur."
SECTION 2.2.  G.S. 147‑86.43 reads as rewritten:
"§ 147‑86.43.  Identification of companies.
(a)	Within 90 days of August 30, 2007, the public fund shall develop and make publicly available a list of companies it determines to be engaged in restricted business activities. In the development of this list, the public fund shall use any other state lists of restricted companies pursuant to similar laws and any federal information or guidance on companies engaged in restricted business activities, and any other credible information provided by nonprofit organizations, research firms, and governmental entities. The public fund shall make every effort to avoid erroneously, including a company on the list. Before finalizing an initial or update list, the public fund must do all of the following before a company is included on the list:
(1)	Provide 90 days written notice of the public fund's intent to include the company on the list. The notices shall inform the company that inclusion on the list would make the company ineligible for State investment, may result in the company becoming subject to divestment by the North Carolina Retirement Systems, and may affect the company's ability to conduct business with the State and its subdivisions. The notice shall specify that the company may be removed from the list if the company ceases engagement in the restricted business activities.
(2)	The public fund shall provide a company with an opportunity to comment in writing that it is not engaged in restricted activities in Sudan. If the company demonstrates to the public fund that the company is not engaged in restricted activities, the company shall not be included on the list.

(c)	The public fund shall update the list on an annual basis based on evolving information from, among other sources, those listed in subsection (a) of this section."
SECTION 2.3.  G.S. 147‑86.44 reads as rewritten:
"§ 147‑86.44.  Required actions.

	

	

	
(d)	Investments Prohibited. – At no time shall the public fund invest with companies on the list created pursuant to G.S. 147‑86.43.
(d1)	Existing Investments. – Any existing investment with a company that is identified on a list created pursuant to G.S. 147‑86.43 as a company engaging in restricted business activities must be divested within 180 days of the adoption of the list.
(e)	Exemption. – No company which the United States Government affirmatively declares to be excluded from its present or any future federal sanctions regime relating to Sudan shall be subject to divestment or investment prohibition pursuant to subsections (c) and (d) of this section.
(e1)	Nothing in this Article shall require the North Carolina Retirement Systems or the State Treasurer to take action unless it is determined by the State Treasurer, in good faith, that the action is consistent with the fiduciary responsibilities of the Retirement Systems and the State Treasurer.
	"
SECTION 2.4.  G.S. 147‑86.45 reads as rewritten:
"§ 147‑86.45.  Reporting.
	The public fund shall report to the Joint Legislative Commission on Governmental Operations annually on October 1 on information regarding investments sold, redeemed, divested, or withdrawn in compliance with this Article.

	
	
	"
SECTION 2.5.  G.S. 147‑86.47 and G.S. 147‑86.48 are repealed.

PART III. AMEND IRAN DIVESTMENT ACT
SECTION 3.1.  G.S. 147‑86.56 reads as rewritten:
"§ 147‑86.56.  Findings.
The General Assembly finds that:
…
(7)	In order to effectively address the need for this State to respond to the policies of Iran in a uniform fashion, prohibiting contracts with companies engaged in investment activities in the energy sector of Iran must be accomplished on a statewide basis.
…."
SECTION 3.2.  G.S. 147‑86.57 reads as rewritten:
"§ 147‑86.57.  Definitions.
As used in this Article:
(1)	"Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association, including all wholly owned subsidiaries, majority‑owned subsidiaries, parent companies, or affiliates of those entities or business associations.
(1a)	"Energy sector of Iran" means activities to develop petroleum or natural gas resources or nuclear power in Iran.
(2)	"Financial institution" means the term as used in Section 14 of the Iran Sanctions Act of 1996, as amended (Public Law 104‑172; 50 U.S.C. 1701 § note).
(3)	"Investment" means a commitment or contribution of funds or property, whatever the source, a loan or other extension of credit, and the entry into or renewal of a contract for goods or services. It does not include indirect beneficial ownership through index funds, commingled funds, limited partnerships, derivative instruments, or the like.
(4)	"Investment activities in Iran" means a company engages in investment activities in Iran if:
a.	The company provides goods or services of twenty million dollars ($20,000,000) or more within any 12‑month period in the energy sector of Iran, including a company that provides oil or liquefied natural gas tankers, or products used to construct or maintain pipelines used to transport oil or liquefied natural gas, for the energy sector of Iran; or
b.	The company is a financial institution that extends twenty million dollars ($20,000,000) or more in credit to another company, for 45 days or more, if (i) the financial institution knows, or reasonably should know, that company will use the credit to provide goods or services in the energy sector in Iran, and (ii) the company receiving credit is identified on a list created pursuant to G.S. 147‑86.60 as a company engaging in investment activities in Iran as described in this section.
(5)	"Iran" includes the Government of Iran and any agency or instrumentality of Iran.
(6)	"Person" means any of the following:
a.	A natural person, corporation, company, limited liability company, business association, partnership, society, trust, or any other nongovernmental entity, organization, or group.
b.	Any governmental entity or instrumentality of a government, including a multilateral development institution, as defined in section 1701(c)(3) of the International Financial Institutions Act (22 U.S.C. § 262r(c)(3)).
c.	Any successor, parent entity owning more than 20%, or majority‑owned subunit or subsidiary of any entity described in sub‑subdivisions (a) and (b) of this subdivision.
(7)	"State agency" means any board, commission, department, executive department, officer, institution, and any political subdivision of the State."
SECTION 3.3.  G.S. 147‑86.58 reads as rewritten:
"§ 147‑86.58.  Prohibitions on State investment.
No more than 30 days after October 1, 2015, the State Treasurer shall adopt a policy prohibiting the North Carolina Retirement Systems or the Department of the State Treasurer from investing funds with a company engaging in investment activities in Iran. At a minimum, the policy shall provide:
(1)	List of restricted companies. – Within 120 days of adoption of the policy, the State Treasurer shall develop and make publically available, a list of companies it determines engage in investment activities in Iran. The State Treasurer shall use any other state lists of restricted companies pursuant to similar laws and any federal information or guidance on companies engaged in investment activities in Iran and any other credible information provided by nonprofit organizations, research firms, governmental entities, and generally public information. The State Treasurer shall make every effort to avoid erroneously including a company on the list. The State Treasurer shall update the list annually. Before finalizing an initial list or an updated list, the State Treasurer must do all of the following before a company is included on the list:
a.	Provide 90 days' written notice of the State Treasurer's intent to include the company on the list. The notice shall inform the company that inclusion on the list would make the company ineligible for State investment and may affect the company's ability to conduct other business with the State and its subdivisions. The notice shall specify that the company may be removed from the list if it ceases its investment activities in Iran.
b.	The State Treasurer shall provide a company with an opportunity to comment in writing that it is not engaged in investment activities in Iran. If the company demonstrates to the State Treasurer that the company is not engaged in investment activities in Iran, the company shall not be included on the list.
(2)	Investments prohibited. – Neither the North Carolina Retirement Systems nor the State Treasurer may invest funds with a company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in investment activities in Iran.
(3)	Existing investments. – Any existing investment with a company that is identified on a list created pursuant to subdivision (1) of this section as a company engaging in investment activities in Iran must be divested within 180 days of being placed on the list created pursuant to subdivision (1) of this section.
(4)	Fiduciary duties. – Nothing in the policy or in this Article shall require the North Carolina Retirement Systems or the State Treasurer to take action unless it is determined by the State Treasurer, in good faith, that the action is consistent with the fiduciary responsibilities of the Retirement Systems and the State Treasurer.
(5)	Exceptions. – Notwithstanding the policy, an investment may be made in a company engaged in investment activities in Iran if:
a.	The company is eligible to contract with the State under the exception in G.S. 147‑86.61.
b.	The State Treasurer makes a good‑faith determination, on a case‑by‑case basis, that the investments are necessary to perform its functions."
SECTION 3.4.  G.S. 147‑86.59 is repealed.
SECTION 3.5.  G.S. 147‑86.60 reads as rewritten:
"§ 147‑86.60.  Restrictions on contracts with the State or subdivisions of the State.
(a)	A company that is identified on a list created by the State Treasurer pursuant to G.S. 147‑86.58 as a company engaging in investment activities in Iran is ineligible to contract with the State or any political subdivision of the State.
(b)	Any contract entered into with a company that is ineligible to contract with the State or any political subdivision of the State is void ab initio.
(c)	Existing contracts with companies made ineligible to contract with the State or any political subdivision of the State under this Article shall be allowed to expire in accordance with the terms of the contract."
SECTION 3.6.  G.S. 147‑86.61 reads as rewritten:
"§ 147‑86.61.  Exceptions.
(a)	G.S. 147‑86.60 does not apply to contracts valued at one thousand dollars ($1,000) or less.
(b)	Companies engaged in substantial positive action. – Notwithstanding any other provision of this Article, a company engaged in investment activities in Iran may not be placed on the list developed pursuant to G.S. 147‑86.58(1) if the State Treasurer determines, using U.S. government statements and any other credible information available to the public, that the company's investment activities in Iran were made before October 1, 2015, the investment activities in Iran have not been expanded or renewed after October 1, 2015, and the company has adopted, publicized, and is implementing a detailed plan to cease the investment activities in Iran and to refrain from engaging in any new investments in Iran. The State Treasurer shall develop and make publically available a "Substantial Positive Action Exception List" of these companies. The State Treasurer shall update the list annually. Once a person has not engaged in investment activities in Iran within the previous five years, the State Treasurer shall remove that person from the list created pursuant to G.S. 147‑86.58.
(c)	Necessary commodities or services. – Notwithstanding any other provision of this Article, a company engaged in investment activities in Iran may contract with the State or a political subdivision of the State, on a case‑by‑case basis, if the State agency or political subdivision makes a good‑faith determination that the commodities or services are necessary to perform its functions and that, absent such an exemption, the State agency would be unable to obtain the commodities or services for which the contract is offered. The determination shall be entered into the procurement record."
SECTION 3.7.  G.S. 147‑86.62 reads as rewritten:
"§ 147‑86.62.  Report; application.
	The State Treasurer shall report to the Joint Legislative Commission on Governmental Operations annually by October 1 on information regarding investments sold, redeemed, divested, or withdrawn in compliance with this Article.

	"
SECTION 3.8.  G.S. 147‑86.63 reads as rewritten:
"§ 147‑86.63.  No private right of action.
(a)	This Article does not create or authorize a private right of action to enforce the provisions of the Article.
(b)	A company may challenge being included on the lists established in this Article using the procedures in Article 3 of Chapter 150B of the General Statutes, except that no company may file a contested case more than once every 365 days, and no attorneys' fees may be awarded under G.S. 150B‑33(b)(11)."
SECTION 4.  Except as otherwise provided, this act becomes effective October 1, 2017.