House committee substitute makes the following changes to the 4th edition. 

Part I. Business Tax Changes

Deletes the repeal of certain deductions and adjustments from federal taxable income when determining state net income under GS 105-130.5(b). 

Retains provisions in GS 105-122(b) for the determination of capital base by corporations subject to the franchise or privilege tax. 

Deletes the amendment to GS 105-122(d) refining the definition of the term total actual investment in tangible property. Reinstates the provision concerning computing the total actual investment in tangible personal property. 

Amends GS 105-228.5(b)(4) to make the tax base for health self-insurers dependent on the self-insurer's payroll as determined under Article 36 of GS Chapter 58, the North Carolina Rate Bureau (was, the now repealed Article 2 of Chapter 97, the Compensation Rating and Inspection Bureau). 

Adds a sentence in GS 105-130.7A(a) clarifying that exercising the income tax royalty reporting option of that statute does not prevent a taxpayer from having taxable nexus in the state and does not permit the recipient of the income to exclude royalty payments from its sales tax calculations. 

Part II. Personal Tax Changes

Replaces the amendment to GS 105-153.5(a), which added to the items that can be included when calculating the itemized deduction. The 4th edition allowed itemizing the amount claimed under section 67(b)(9) of the Internal Revenue Code (Code) related to when a taxpayer restores a substantial amount held under claim of right, less the limitation produced under 67(a) of the Code minus all other items deductible under section 67(b) of the Code, not to exceed the limitation in section 67(a). The new amendment to GS 105-153.5(a) allows taxpayers to itemize repayment in the current taxable year of an amount included in adjusted gross income in an earlier taxable year because it appeared that the taxpayer had an unrestricted right to such item. 

Retains GS 105-269.7, Contribution of income tax refund or payment to the North Carolina Education Endowment Fund, which was repealed in the previous edition. 

Part III. Sales Tax Changes

Removes the proposed definition of operator from GS 105-164.3. 

Deletes the proposed exemptions in GS 105-164.13 and GS 105-164.4I from sales and use taxes the sale and service contracts of engines and other items provided to a professional motorsports racing team. Deletes the amendment to GS 105-164.14A, concerning sales and use tax refunds for tangible personal property that comprises any part of a professional motorsports vehicle.  

Adds new wording to the amendment to GS 105-164.12B (tangible personal property sold below cost with conditional service contract). The amendment makes sales tax due at the time of the transfer of tangible personal property as part of the conditional contract, on the percentage of the presumed sales price that is equal to the percentage of the service in the contract that is not taxable at the combined general rate, if any part of the service in the contract is not taxable at the combined general rate. The new language states that any part of the presumed sales price the consumer pays if the service in the contract is taxable at the combined general rate is also taxable. Makes a technical change to this section. 

Removes the exemption from sales tax in GS 105-164.13(57) fuel or piped natural gas used solely for comfort heating at a manufacturing facility where there is no use of fuel or piped natural gas in a manufacturing process. Includes a new exemption for fuel, piped natural gas, and electricity sold to a secondary metals recycler.   

Removes the provision that an interstate passenger air carrier is allowed a refund of the sales and use tax paid by it on fuel in excess of $1.25 million for the period beginning July 1, 2015, and ending December 31, 2015.

Retains language in GS 105-164.14(b), removed by the 4th edition, stating that the sales and use tax liability indirectly incurred by a nonprofit through reimbursement to an authorized person of the entity for the purchase of tangible personal property and services for use in carrying on the work of the nonprofit is considered a direct purchase by the entity. Adds that a refund allowed to a nonprofit of sales tax does not apply to purchases of prepared food or accommodation rentals unless the purchase is made directly by the nonprofit.

Amends GS 105-164.42I(b) to allow the Streamlined Sales Tax Governing Board, and not just the Secretary of Revenue (Secretary), to set the amount of a bond, letter of credit, or certificate of deposit required of a certified service provider entering into contract for collection and remittance of sales and use taxes. 

Adjusts the definition of recreational vehicle in GS 105-187.1 to exclude manufactured homes as defined in GS 143-143.9. 

Removes the amendment to GS 105-187.6, which provided that a maximum $150 tax would apply when a certificate of title is issued for a motor vehicle that has been titled in the name of the owner of the vehicle in another state for at least 90 days before the date of the application for a certificate of title in this state (was, vehicle is and has been titled in another state for at least 90 days).

Includes a statement that a retailer is not liable for an over-collection or under-collection of sales tax or highway use tax on a park model RV if the retailer made a good-faith effort to comply with the law. Applies to sales of park model RVs made before January 1, 2016.

Removes from the amendment to GS 105-164.29A(a) the state government sales tax exemption and sales tax refund of local taxes paid on indirect purchases, an exception for certain government entities listed in GS 105-521.2. 

Amends GS 105-164.4G(b) to require tax on gross receipts from admission charges to an entertainment activity to be reported after the entertainment activity occurs (was, monthly or quarterly). This amendment becomes effective January 1, 2016. 

Amends GS 105-187.51B to impose an excise tax of 1% of the sales price, with an $80 cap, on repair or replacement parts for a ready-mix concrete mill, regardless of whether the equipment is freestanding or affixed to a motor vehicle, and on equipment purchased by a company primarily engaged in secondary metals recycling as defined in GS 66-420. The excise tax for concrete mills becomes effective on January 1, 2016. The changes for secondary metals recyclers is retroactive to 2010, and the committee substitute provides an expedited refund application period for that category of taxpayers who paid a sales and use tax, rather than the excise tax; those requests must be made by January 1, 2016. 

Amends GS 105-465 to no longer require the special election on whether to levy a 1% sales tax to be held under the rules applicable to the election of General Assembly members.

The committee substitute directs the Revenue Laws Study Committee to study the application or exemption from sales tax on admission charges for certain entertainment, including haunted houses and hay rides, and report to the 2016 General Assembly. 

Expands the privilege tax on a company at a ports facility for waterborne commerce that purchases qualified equipment in GS 105-187.51B(a)(5) to include in the definition of qualified equipment (1) machinery and equipment used at the facility to unload or process bulk cargo and (2) parts, accessories, and attachments used to maintain and repair machinery and equipment. 

Part IV. Excise Tax Changes

Removes the changes to the formula in GS 105-113.86 for bonds required of wine and malt beverage wholesalers and importers.

Amends GS 105-113.84 to allow wine shippers to file reports with the Secretary annually (was, monthly). 

Makes conforming changes to GS 105-449.39, the credit for payment of motor fuel tax, and GS 105-449.107, refunds for off-highway use and use by certain vehicles with power attachments based on changes made by earlier acts. 

Old Part V. Tax Compliance and Tax Fraud Prevention

Deletes the prior Part V in its entirety, including changes to the requirements in GS 105-163.7 and GS Chapter 105, Article 4A, concerning employer withholding. Also retains the discretion of the Secretary to require additional information in certain employer reports. Deletes amendments bringing additional parties under this reporting requirement and providing penalties for failure to file. 

Deletes the amendment to GS 105-237 to provide the Secretary with discretion to reduce or waive any interest on taxes imposed prior to or during a period for which a taxpayer has declared bankruptcy. 

Deletes the addition of a new GS 105-251.2 requiring franchisors, certain licensing boards, and alcohol vendors to give to the Secretary certain information necessary to determine compliance with the tax law.

New Part V. Other Tax Changes

Includes the following additional provisions in the renumbered Part V.

Amends GS 18B-900(c) to limit the tax compliance requirements for Alcoholic Beverage Control permit applicants or holders to the actual applicant or holder and not other individuals. This section applies retroactively to ABC permits issued or renewed on or after May 1, 2015.

Amends GS 147-86.42(8) to include securities held through index funds in the definition of indirect holdings, which are excluded from the Sudan Investment Act. Makes conforming changes. 

Amends SL 2011-373 to remove a 2016 sunset from provisions encouraging state agencies to identify surplus real property.

Amends GS 147-69.1(c)(3) to allow the state Treasurer to invest state funds in short-term money market repurchase agreements executed by a registered broker-dealer subject to the rules and regulations of the US Securities and Exchange Commission and a member in good standing of the Financial Industry Regulatory Authority. 

Amends GS 143B-437.01(a) to require that funds from the Industrial Development Fund Utility Account (Account) be used in the most economically distressed counties of North Carolina to retain as well as expand the existing job base (previously, only required the funds to be provided to create jobs in the distressed counties). Makes conforming changes to the rules for the program funds reflecting the need to use funds to expand the job base and retain existing jobs. 

Amends the catch line of GS 105-187.51B  to read: Tax imposed on machinery, equipment, and other tangible personal property used by certain companies. (was, Tax imposed on certain recyclers, research, and development companies, industrial machinery refurbishing companies, and companies located at ports facilities.) Amends GS 105-187.51B(a)(6) to provide that a privilege tax is also imposed on a company with annual gross receipts of at least $8 million, including the gross receipts of all related persons as defined in GS 105-163.010. Expands the equipment purchase requirements that a company must meet to include that the equipment or attachment or repair part for the equipment may be used by the company to establish the fabrication or manufacture of metal products or use by the company to create equipment for the fabrication or manufacture of metal products. Provides that a company would not be required to be primarily engaged in the fabrication of metal products to meet the requirements for the privilege tax. This section becomes effective January 1, 2016. 

Directs the Revenue Laws Study Committee to study the scope and application of the privilege tax at the rate of 1% with an $80 cap for purchases of mill machinery and other equipment and report its findings, along with any legislative recommendations, to the 2016 Regular Session of the 2015 General Assembly. 

Amends GS 58-36-75(a) to adjust the cost thresholds that distinguish accidents in the Safe Driver Incentive Plan for Car Insurance. Under the proposed thresholds, a "major accident" is an at-fault accident resulting in property damage of $3,085 (was, $3,000) or more; an "intermediate accident" is one that results in damage between $1,850 (was, $1,800) and $3,085; a "minor accident" is one with damage of $1,850 or less. This section becomes effective March 1, 2016. 

Amends Section 29.34A(c) of SL 2015-241 to provide that the changes to GS 105-187.3 and  GS 105-187.6 concerning the adjustment of the maximum highway use tax imposed for certain motor vehicles applies to a certificate of title issued on or after January 1, 2016, or for the purposes of GS 105-187.5, a lease or rental agreement entered into on or after January 1, 2016.

Makes a technical change to GS 105-164.3(38b), defining service contract. Effective March 1, 2016.

Amends GS 105-524, enacted by SL 2015-241, to do the following. Amends the statute (concerning the distribution of additional sales tax revenue for economic development, public education, and community colleges) to require that the distribution amount be deducted in equal installments, proportionately from the collections to be allocated each month for distribution under GS Chapter 105 Articles 39 (First One-Cent Local Government Sales and Use Tax), 40 (First One-Half Cent Local Government Sales and Use Tax), and 42 (Second One-Half Cent Local Government Sales and Use Tax), excluding the revenue allocated under GS 105-469 (collection and administration of a tax levied by a county pursuant to Article 39). Prohibits the deduction from Articles 30, 40, and 42 from being included in the calculations made under GS 105-469, GS 105-522, and GS 105-523. Makes conforming changes to GS 105-469, GS 105-522, and GS 105-523. Adds that if, after applying the allocation percentages under the statute, the total of the amounts allocated is greater or less than the net proceeds to be distributed, then the amount allocated to each county must be proportionally adjusted to eliminate the excess or shortage. These provisions are effective July 1, 2016, and apply to local option sales taxes collected on or after that date and distributed to counties and cities on or after September 1, 2016.

Part VI. Local Option Sales Tax for Counties

Enacts new Article 43A, County Sales and Use Tax for Public Education in GS Chapter 105, the intent of which is to give counties the chance to obtain an additional source of revenue with which to finance public education needs.

Allows a board of county commissioners, by resolution after 10 days' public notice, to levy a local sales and use tax of a maximum rate of 1/2% if the following conditions are met: (1) the tax is in an increment of 1/4%; (2) the tax is approved by a majority of those voting in a referendum; (3) no other ballot question on the levy of a local sales and use tax is presented in the same referendum; and (4) if levied, the tax would not result in a total local sales and use tax rate in the county in excess of 2 1/2%. Sets out requirements for the referendum and the ballot question. Allows a county’s local sales and use tax to exceed 2 1/2% if the county is authorized to levy a tax at the rate of 1/2% under GS Chapter 105, Article 43 (Local Government Sales and Use Taxes for Public Transportation); prohibits the local sales and use tax rate in a county from exceeding 2 3/4%. Requires the additional taxes to be adopted, levied, collected, administered, and repealed in accordance with GS Chapter 105, Article 39 (First One-Cent Local Government Sales and Use Tax). Provides that taxes under this new Article do not apply to the price of food that is exempt from tax or to the price of a bundled transaction taxable under GS 105-467(a)(5a). Prohibits the Secretary from dividing the amount allocated to counties between the county and municipalities within the county.

Limits a county’s use of the proceeds from the tax levied under the new Article to: (1) public school capital outlay purposes or to retire related indebtedness; (2) salaries of classroom teachers and classroom teacher assistants, and supplements of classroom teacher salaries (as classroom teacher and teacher assistant are defined in the act); and (3) financial support of community colleges.

Amends GS 115C-429, concerning school budgets to provide that for allocations by the board of county commissioners for the purpose of or for a function related to instructional services, the board may direct the amount of funds to be used for salaries of classroom teachers and teacher assistants, and supplements of classroom teacher salaries; defines classroom teacher and teacher assistants.

Amends GS 115C-433 to require if the board of county commissioners allocates its appropriations under GS 115C-429(b), the board of education must get approval from the board of county commissioners for an amendment to the budget that decreases the amount of funds allocated for salaries of classroom teachers and teacher assistants, and teacher salary supplements.

Amends GS 115D-55, concerning community college budgets, to add that the local tax-levying authority may direct the use of funds appropriated to an institution derived from a tax levied under new GS Chapter 105, Article 43A.

Amends GS 115D-58 to require if the local tax-levying authority allocates its appropriations under GS 115D-55, the board of trustees must get approval from the authority for an amendment to the budget that decreases the amount of the appropriation directed by the authority for a specific use from funds appropriated to the institution derived from a tax levied under new GS Chapter 105, Article 43A.

Amends GS Chapter 105, Article 43 (Local Government Sales and Use Taxes for Public Transportation), Part 6, which applies to all counties except Durham, Forsyth, Guilford, Mecklenburg, Orange, or Wake counties, as follows. Requires the levy of the tax be made only by resolution after 10 days’ public notice. Expands on the conditions that must be met in order to levy the tax, so that in addition to requiring that the county, or at least one unit of local government in the county, operates a public transportation system, also requires that: (1) the tax be approved by a majority of those voting in a referendum; (2) no other ballot question on the levy of a local sales and use tax under Articles 45 or 46 (One-Quarter Cent County Sales and Use Tax) be presented on the same ballot; and (3) if levied, the tax would not result in a total local sales and use tax rate in the county in excess of 2 1/2%. Makes conforming changes.

Amends GS Chapter 105, Article 46 (One-Quarter Cent County Sales and Use Tax) to change the tax rate from 1/4% to a maximum of 1/2%. Expands on the conditions that must be met to levy the tax to require that: (1) the tax be in increments of 1/4%; (2) the tax is approved by a majority of those voting in a referendum; (3) no other ballot question concerning the levy of a local sales and use tax authorized under Article 43 (Local Government Sales and Use Taxes for Public Transportation) or new Article 43A are presented in the same referendum; and (4) if levied, the tax would not result in a total local sales and use tax rate in the county in excess of 2 1/2%. Makes conforming changes. Allows the local sales and use tax rate in a county to exceed 2 1/2% if the county is authorized to levy a tax at the rate of 1/2% under Article 43; prohibits the local sales and use tax in a county from exceeding 2 3/4%.

Amends GS 105-164.3 to define the combined general rate as the sum of (1) the state’s general rate of tax; (2) the sum of the rates of the local sales and use taxes authorized for every county by GS Chapter 105, Articles 39 (or SL 1967-1096), 40, and 42; and (3) one-half of the maximum rate of tax authorized by GS Chapter 105, Article 46.

Part VIII. Amend Laws Pertaining to NC Medical Board

Amends GS 90-2(b) concerning the NC Medical Board (Board), providing that no member can serve more than two complete consecutive three-year terms in a lifetime (previously did not limit it to a lifetime). Amends GS 90-3(b), adding language that provides that you cannot have served more than 72 months as a member of the Board as criteria for serving on the Board. Amends GS 90-3(c), making technical changes.

Adds new subsections to GS 90-3, concerning the Review Panel, recommending certain Board members, providing that the Board can provide the Review Panel with confidential and nonpublic licensing and investigative information it possesses. Provides that the information the Review Panel receives or gathers is not a public record but rather is privileged, confidential, and not subject to discovery or other legal means of compulsory release. Requires the Review Panel to publish specified information concerning the nominees to the Board. Establishes that the Review Panel is a public body within the meaning of GS Chapter 143, Article 33C, authorized to conduct business as specified.

Amends GS 90-5.2 concerning the collecting and publishing of data collected by the Board, making technical and clarifying changes. 

Amends GS 90-8.1, concerning the rules for licensure, providing that the Board cannot deny an application for licensure based solely on the applicant's failure to become board-certified. Makes technical changes. 

Amends GS 90-13.1(a), changing the application fee to be licensed to practice medicine and surgery in North Carolina to $400 (was, $350).

Amends GS 90-13.2, concerning specified registration fees, requiring all individuals licensed to practice medicine in North Carolina to register with the Board and pay a $250 registration fee (was, $175). Provides that those that have a retired limited volunteer license, pursuant to GS 90-12.1B, are not required to pay an annual registration fee (previously, were required to pay a $25 fee). Deletes language which provided that inactive physicians in North Carolina could direct the Board to place their licenses on inactive status. Makes technical and conforming changes. 

Amends GS 90-14(n) concerning disciplinary proceedings, making technical and clarifying changes, deleting language which only allowed service of process to both the licensee and counsel if the licensee retained counsel before the Board made a nonpublic determination to initiate disciplinary proceedings. 

Enacts new GS 90-14.2(c) concerning discovery in disciplinary hearings, providing that the parties can engage in discovery once charges have been issued. Further provides that the Board must provide the respondent or counsel, upon request, with information obtained during an investigation, except for (1) information subject to attorney-client privilege or that is attorney work product; (2) information that would identify an anonymous complainant; and (3) information that will not be offered into evidence and is related to advice, opinions, or recommendations of the Board staff, consultants, or agents, or deliberations by the Board and its committees during an investigation.

Amends GS 90-14.13(a1)(1), deleting language which provided an exception to the prohibition on hospitals reporting the suspension or limitation of a physician's privileges for failure to timely complete medical records.

Amends GS 90-21.22, renaming the statute as Health program for medical professionals (was, Peer review agreements). Amends subsection (a) of GS 90-21.22 to provide that the North Carolina Medical Board (Board) may enter into agreements with the North Carolina Medical Society (Society), the North Carolina Academy of Physician Assistants (Academy), and the North Carolina Physicians Health Program (Program) to identify, review, and evaluate the ability of persons licensed by the Board and referred to the Program to function in their professional capacity and to coordinate regimens for treatment and rehabilitation. Deletes provisions specifying peer review activities to be covered by this type of agreement. Requires the agreement to include guidelines for (1) the assessment, referral, monitoring, support, and education of licensees of the Board by reason of a physical or mental illness, a substance use disorder, or professional sexual misconduct; (2) procedures for the Board to refer licensees to the Program; (3) criteria for the Program to report licensees to the Board; (4) a procedure for licensees to obtain review of recommendations by the Program regarding assessment or treatment; (5) periodic reporting of statistical information by the Program to the Board, the Society, and the Academy; and (6) maintaining the confidentiality of nonpublic information. Describes the Program as an independent organization for medical professionals that provides screening, referral, monitoring, educational, and support services. Provides that the Board, Society, and Academy may provide funds for the administration of the Program. Requires the Program to report immediately to the Board detailed information about any licensee of the Board who meets specified criteria including: constitutes an imminent danger to patient care (was, to the public or him- or herself) by reason of mental or physical illness, substance use disorder, professional sexual misconduct (was, sexual boundary violations) or any other reason. Sets out provisions concerning when copies of written assessments must be given to a licensee.

Repeals GS 90-16(d) (concerning the access of specified information to a licensee).

All of this Part is effective January 1, 2016.

Makes other technical changes and conforming changes.

Senate committee substitute makes the following changes to the 1st edition. Amends provisions from the 1st edition and adds sections, as follows.

Part I.

Repeals GS 105-121.1 (setting the annual franchise or privilege tax on domestic mutual burial associations) effective for taxes due on or after April 1, 2016.

Amends GS 105-129.26 to provide that a recycling facility meeting all of the specified conditions is eligible for the tax benefits in GS Chapter 105, Article 5F, concerning certain machinery and equipment (was, Article 5 concerning sales and use tax).

Deletes proposed GS 105-130.4(s2), concerning the apportionable income of a business in couriers and express delivery services industry group 4921. Amends GS 105-103.4(s) to clarify that all apportionable income of an air transportation corporation is to be apportioned by the specified fraction. Adds that a qualified air freight forwarder must use the revenue ton mile fraction of its affiliated airline. Adds definitions for the terms air transportation corporation and qualified air freight forwarder. Effective for taxable years beginning on or after January 1, 2015.

Repeals the following deductions from federal taxable income when determining state net income under GS 105-130.5(b): (1) amortization in excess of depreciation allowed under the Code on the cost of any sewage or waste treatment plant, and facilities or equipment used for purposes of recycling or resource recovery of or from solid waste, or for purposes of reducing the volume of hazardous waste generated; (2) depreciation of emergency facilities acquired prior to January 1, 1955; (3) reasonable expenses, in excess of deductions allowed under the Code, paid for reforestation and cultivation of commercially grown trees; (4) eligible income of an international banking facility to the extent included in determining federal taxable income; (5) amount paid during the income year as marketing assessments on tobacco grown by the corporation in North Carolina; (6) interest, investment earnings, and gains of a trust, the settlors of which are two or more manufacturers that signed a settlement agreement with this State to settle existing and potential claims of the State against the manufacturers for damages attributable to a product of the manufacturers, for trusts meeting the specified conditions; (7) the amount paid to the taxpayer during the taxable year from the Hurricane Floyd Reserve Fund in the Office of State Budget and Management for hurricane relief or assistance; and (8) the amount paid to the taxpayer during the taxable year from the Disaster Relief Reserve Fund in the Office of State Budget and Management for hurricane relief or assistance. Repeals the following other adjustments to federal taxable income when determining state net income: (1) the addition to federal taxable income of the amount of any recovery during the taxable year not included in federal taxable income, to the extent the taxpayer's deduction of the recovered amount in a prior taxable year reduced the taxpayer's tax imposed by this Part but, due to differences between the Code and this Part, did not reduce the amount of the taxpayer's tax imposed by the Code and (2) the savings and loan association deduction of interest earned on deposits at the Federal Home Loan Bank of Atlanta. Effective for taxable years beginning on or after January 1, 2016.

Amends GS 105-130.5(b)(11) to amend the deduction from federal taxable income in determining state net income; that is, for an ordinary and necessary business expense required to be reduced or not allowed because the corporation claimed a federal tax credit against its federal tax liability instead of a deduction, by removing the provision allowing the deduction only to the extent that a similar credit is not allowed by GS Chapter 105 for the amount. Effective for taxable years beginning on or after January 1, 2016.

Repeals from the provisions in GS 105-122(b) for the determination of capital base by corporations subject to the franchise or privilege tax the following allowable reservations or allocation from surplus or undivided profits: (1) reserves for the cost of any air-cleaning device or sewage or waste treatment plant and pollution abatement equipment purchased or constructed and installed which reduces the amount of air or water pollution resulting from the emission of air contaminants or the discharge of sewage and industrial wastes or other polluting materials or substances into the outdoor atmosphere or streams, lakes, or rivers upon condition that the corporation give the Secretary a certificate certifying specified conditions have been met; (2) reserves for the cost of purchasing and installing equipment or constructing facilities for the purpose of recycling or resource recovering of or from solid waste or for the purpose of reducing the volume of hazardous waste generated is to be treated as deductible for the purposes of this section upon certification that specified conditions have been met; (3) reserves for the cost of constructing facilities of any private or public utility built for the purpose of providing sewer service to residential and outlying areas shall be treated as deductible for the purposes of this section with respect to abatement plants or equipment constructed or installed on or after January 1, 1955; (4) in the case of an international banking facility, the capital base must be reduced by the excess of the amount as of the end of the taxable year of all assets of an international banking facility employed outside the United States over liabilities of the international banking facility owed to foreign persons. Effective for taxable years beginning on or after January 1, 2017.

Amends GS 105-122(d) to provide that the term total actual investment in tangible property means the total original purchase price or consideration to the reporting taxpayer of its tangible property in this state plus additions and improvements less reserve for depreciation as permitted for income tax purposes (was, also less any indebtedness incurred and existing by virtue of the purchase of any real estate and any permanent improvements made). Deletes the provision concerning computing the “total actual investment in tangible personal property.” Effective for taxable years beginning on or after January 1, 2017.

Part II.

Amends GS 105-153.5(a) to add to the items that can be included when calculating the itemized deduction from personal income tax to allow itemizing the amount claimed under section 67(b)(9) of the Code related to when a taxpayer restores a substantial amount held under claim of right, less the limitation produced under 67(a) of the Code minus all other items deductible under section 67(b) of the Code, not to exceed the limitation in section 67(a). Makes a conforming deletion of proposed GS 105-153.5(b)(11), but retains proposed (b)(10). Effective January 1, 2014.

Retains proposed changes to GS 105-153.5(c) and to GS 105-163.1.

Repeals GS 105-269.7 (Contribution of income tax refund or payment to the North Carolina Education Endowment Fund). Effective for taxable years beginning on or after January 1, 2015.

Part III.

Makes Section 2.1 of SL 2014-66, which amended GS 62A-54(c) to add that collection of tax debts apply to the collection of the 911 service charge for prepaid wireless telecommunications service, effective July 1, 2013, instead of July 1, 2014.

Effective when the act becomes law, amends the definitions for use in GS Chapter 105, Article 5, Sales and Use Tax, as found in GS 105-164.3 as follows. Deletes the following terms: clothing, clothing accessories or equipment, Energy Star qualified product, school instructional material, school supply, and sport or recreational equipment. Adds and defines the term operator. Amends the conditions to be met to be considered prepared food to add that a plate does not include a container or packaging used to transport the food when meeting the condition of food being sold with eating utensils provided by the retailer, such as plates and other specified utensils. Amends the term Streamlined Agreement to now mean the Streamlined Sales and Use Tax Agreement as amended as of May 13, 2015 (was, as of October 30, 2013). Effective January 1, 2016, further amends those definitions as follows. Amends the term state agency to also exclude from that term an occupational licensing board as defined in GS 93B-1, and any state governmental entity listed in GS 105-164.14(c) (allowing specified governmental entities an annual refund of sales and use taxes paid by it on direct purchases of tangible personal property and services) or GS 105-521.2 (concerning compliance information requests created in Section 5.3 of this act). Amends the term storage to define it as keep or retaining in North Carolina tangible personal property or digital property, except for the sale in the regular course of business, for any period of time purchased from a person in business; retains the deletion made in the previous edition of specified circumstances under which the term did not include a purchaser’s storage of tangible personal property or digital property.

Amends GS 105-164.4B to make a technical correction, providing that the rental of an accommodation, as defined in GS 105-164.4F (was, GS 105-164.4(a)(3)) is sourced to the accommodation location.

Amends GS 105-164.4G, concerning the tax on gross receipts derived from an admission charge to an entertainment activity, to provide that a retailer is also a person that receives gross receipts derived from an admission charge sold at retail.

Amends GS 105-164.4H to refer to tangible personal property applied to real property, instead of affixed to real property.

Amends GS 105-164.4I to require retailers who receive sales tax due from a facilitator to report for the prior reporting period all tax received from the facilitator on or after the first day of the month but before the tenth day of the month.

Amends GS 105-164.13 to exempt specified car parts leased or rented by a professional motorsports racing team or a related member of a team for use in competition in a sanctioned race series from sales and use tax. Expires January 1, 2020. Amends GS 105-164.4I to provide that the sales and use tax on service contracts does not apply to an item purchased by a related member of a professional motorsports racing team for which the team may receive a sales tax refund. Effective January 1, 2014, and applies to services contracts purchased on or after that date. Amends GS 105-164.14A, concerning sales and use tax refunds, to provide that professional motorsports racing teams or a related member of a team is allowed a refund equal to the applicable percentage of the tax paid (was, refund of 50% of the tax paid) by it in this state on tangible personal property, other than tires or accessories, that comprises any part of a professional motorsports vehicle. Sets out the applicable percentages which start at 50% and reduce to 12.5%, depending on the year in which the item is purchased. Repeals this provision for purchases made on or after January 1, 2020 (was, January 1, 2016).

Amends GS 105-164.4D, GS 105-468, and GS 105-471, replacing the term "retailer’s cost price" with "retailer’s purchase price."

Amends GS 105-164.12B (tangible personal property sold below cost with conditional service contract) to replace the term "conditional service contract" with "conditional contract." Makes sales tax due at the time of the transfer of tangible personal property as part of the conditional contract, on the percentage of the presumed sales price that is equal to the percentage of the service in the contract that is not taxable at the combined general rate, if any part of the service in the contract is not taxable at the combined general rate. Amends GS 105-467 to add that the sales tax is limited to a tax of 1% of the presumed sales price of an item of tangible personal property under GS 105-164.12B.

Repeals GS 105-164.13(34), which exempted from retail sales and use tax the sales of items by a nonprofit civic, charitable, educational, scientific, or literary organization when the net proceeds of the sales will be given or contributed to the State or to one or more of its agencies or instrumentalities, or to one or more nonprofit charitable organizations, one of whose purposes is to serve as a conduit through which such net proceeds will flow to the state or to one or more of its agencies or instrumentalities. Further amends GS 105-164.13 to create an exemption for food, prepared food, soft drinks, candy, and other items of tangible personal property sold not for profit for or at an event sponsored by an elementary or secondary school when the proceeds of the sales will be given to the school or nonprofit, one of whose purposes is to serve as a conduit through which the net proceeds will flow to the school. Applies to sales made on or after January 1, 2016.

Amends GS 105-164.13 by adding that the charges for installation, delivery, and interior design services must be separately stated and identified as such on billing given to the purchaser in order to be exempt from the sales and use tax.

Amends GS 105-164.13 to add an exemption from the sales and use tax for piped natural gas sold to a manufacturer for use in the operation of the manufacturing facility; excludes from the exemption fuel or piped natural gas that is not used directly in a manufacturing process. Corrects a statutory reference. Effective January 1, 2016.

Amends GS 105-164.13E to provide that the sales tax exemption for items purchased by a contractor applies to items purchased for the holder of a conditional farmer exemption certificate as well as the holder of a qualifying farmer exemption certificate (was, to an agricultural exemption certificate holder). Amends Section 2.13 of SL 2015-6 to correct a statutory reference.

Provides that an interstate passenger air carrier is allowed a refund of the sales and use tax paid by it on fuel in excess of $1.25 million for the period beginning July 1, 2015, and ending December 31, 2015.

Amends GS 105-164.14 to add that the refund of sales and use taxes allowed on direct purchases of tangible personal property and services for use in carrying on the work of the nonprofit does not apply to purchases of prepared food or accommodation rentals for an employee or other authorized person unless the purchase is made directly by the nonprofit. Effective when the act becomes law. Effective July 1, 2016, further amends the statute to remove the provision stating that the sales and use tax liability indirectly incurred by a nonprofit through reimbursement to an authorized person of the entity for the purchase of tangible personal property and services for use in carrying on the work of the nonprofit is considered a direct purchase by the entity.

Repeals GS 105-164.14A(a)(3), which gave a taxpayer engaged primarily in one of the businesses listed in GS 105-129.83(a) in a development tier one area and that placed machinery and equipment in service in that area, a refund of the sales and use tax paid by it on the machinery and equipment. 

Amends GS 150-164.22 to no longer limit the time period under which retailers, wholesale merchants, and consumers must keep records that establish tax liability to a period of three years.

Amends GS 105-164.30 to make clarifying changes.

Amends GS 105-164.42L to provide that a person who relies on the information provided in specified databases or the taxability matrix is not liable for tax underpayments attributable to errors in the database or matrix until 10 business days after the date of notification by the Secretary of Revenue. Amends GS 105-466 to provide that a local sales and use tax increase may only be effective on the first day of a calendar quarter after a minimum of 60 days’ notice to the sellers by the Secretary (was, in no event may the tax be imposed, or the tax rate changed, earlier than the first day of the second succeeding calendar month after the date of the adoption of the resolution).

Amends GS 105-164.42I to allow a certified service provider to file evidence of a certificate of deposit, in lieu of a bond or an irrevocable letter of credit. Makes conforming changes.

Amends GS 105-187.1, definitions for Article 5A, NC Highway Use Tax, to add that the term recreational vehicle includes a park model RV and adds and defines the term park model RV. Makes technical changes. Amends GS 105-164.13 to make a park model RV exempt from sales and use tax.

Amends GS 105-187.6 to provide that a maximum $150 tax applies when a certificate of title is issued for a motor vehicle that has been titled in the name of the owner of the vehicle in another state for a least 90 days before the date of the application for a certificate of title in this state (was, vehicle is and has been titled in another state for at least 90 days).

Amends GS 105-187.21 to provide that an excise tax is imposed on new white goods purchased (was, purchased outside of the state) for storage, use, or consumption in this state.

Amends GS 105-538 to require the Secretary to allocate monthly the net proceeds of the 1/4¢ county sales and use tax to each taxing county. Specifies the procedure when the Secretary collects taxes in a month and the taxes cannot be identified as being attributable to a particular taxing county.

Part IV.

Creates a formula for bonds that the Secretary of Revenue may require to protect the state from loss by cigarette distributors and cigarette wholesale and retail dealers who fail to pay taxes due. The bond must equal two times the distributor's or dealer's average expected monthly tax liability, but be not less than $2,000 and not more than $2 million. Current law allows the secretary to set the bond based on the anticipated tax liability of the distributor or dealer. 

Makes technical changes to the exemption of cigarette and vapor products from certain excise taxes in GS 105-113.35.

Changes the formula for bonds required of wine and malt beverage wholesalers and importers. The bond must equal two times the wholesaler's or importer's expected monthly tax liability (was, proportionate to their anticipated tax liability) and be not less than $2,000 (was, $5,000) and not more than $2 million (was $50,000).

Requires wine shipper permittees to submit verified reports of sales records to the Secretary of Revenue only once a year and on or before the fifteenth day of the first month of the following calendar year. Current law requires wine shipper permittees, like wholesalers and importers, to submit verified reports on a monthly basis.  

Repeals GS 105-187.82 of Article 5I of GS Chapter 105, the tax on severance of energy minerals, which became effective July 1, 2015, that shifts the primary liability for the tax from producers to first purchasers who fail to secure the producer's taxpayer number. Makes one conforming change. 

Requires producers of energy minerals to file a bond or irrevocable letter of credit prior to obtaining a drilling permit under GS 113-395 (the law effective July 1, 2015, requires a bond or irrevocable letter of credit only if the producer fails to file a return) and requires that it be not less than $2,000 and not more than $2 million (current law requires only that it be two times the applicant's average expected monthly tax liability). Further requires that the Secretary of Revenue periodically review the sufficiency of bonds and increase or decrease them as necessary to protect the state from loss. 

Adds two exceptions to GS 105-259(b) to allow an officer, employee, or agent of the state to disclose tax information by (1) providing a list of tobacco licensees to aid in the administration of the tobacco products tax and (2) exchanging information regarding the tax imposed on motor carriers with other jurisdictions that administer the International Fuel Tax Agreement. Makes one conforming change. 

Makes permitting services (was, motor carriers) the recipient of temporary permits under GS 105-449.49 authorizing a motor carrier to operating in the state for three days without registering the vehicle and allows the permitting service to sell the temporary permit to a motor carrier. Makes certain technical changes. 

Makes clarifying changes.

Part V. 

Makes certain changes to the requirement in GS 105-163.7 that employers deducting and withholding from an employee's wages under GS 105-163.2 furnish a report to the employee on an annual basis and makes certain changes to GS Chapter 105, Article 4A, concerning withholding, to bring various types of payments under this reporting requirement, effective for taxable years beginning on or after January 1, 2015. The changes to the reporting requirement include provision of the employee's address along with certain other identifying information already required. Also removes the discretion of the Secretary of Revenue (Secretary) to require additional information on this report or require its provision at a different time than authorized in the subsection. Brings under this reporting requirement (1) pension payers, under GS 105-163.2A; (2) the North Carolina State Lottery Commission, under GS 105-163.2B; and (3) payers of a contractor's compensation, under GS 105-163.3, by substituting this requirement for other reporting requirements and making certain conforming changes.  Changes the date by which employers must submit an annual report to the Secretary under GS 105-163.7 to January 31 of the succeeding year (was, the same date the employer's federal income tax return is due) and requires that the report be submitted in electronic format, though the Secretary is allowed to waive the electronic submission requirement. Provides for penalties for failure to file this report, effective for taxable years beginning on or after January 1, 2016. 

Amends GS 105-237 to provide the Secretary with discretion to reduce or waive any interest on taxes imposed prior to or during a period for which a taxpayer has declared bankruptcy. 

Adds a new GS 105-251.2 to Article 9 of Subchapter I of GS Chapter 105 requiring franchisors, certain licensing boards, and alcohol vendors to give to the Secretary certain information that the Secretary deems necessary to determine the compliance of franchisees, licensees, and permittees with the tax law. The Secretary may not request such information more than once per calendar year. This section becomes effective July 1, 2016. 

Part VI.

Amends the changes made in the previous edition to GS 105-242.2(e) to provide that the period of limitations for assessing a responsible person for unpaid taxes under this section expires one year after the period of limitations for assessing the business entity expires or one year after a tax becomes collectible under GS 105-241.22(3), (4), (5), or (6), whichever comes later. Effective when the act becomes law and applies to a tax that becomes collectible from the business entity under GS 105-241.22(3), (4), (5), or (6) on or after that date.

Repeals GS 105-521,  Transitional local government hold harmless for repealed reimbursements.

Repeals GS 131E-28, concerning hospital authority tax exemptions. Amends GS 105-130.5 to allow a deduction from federal income tax in determining state net income for the interest upon the obligations of a hospital authority. Amends GS 105-153.5 to allow a deduction in calculating state taxable income interest on the obligations of a hospital authority. Amends GS 105-449.88 to exempt motor fuel sold to a hospital authority from the motor fuel tax.

Repeals GS 153A-134(b), which stated that the statute, regulating and licensing businesses, trades, etc., does not impair the county's power to levy privilege license taxes on occupations, businesses, trades, professions, and other activities pursuant to GS 153A-152.

Part VII.

Unless otherwise indicated, effective when the act becomes law.