N.C. Senate initially approves omnibus tax bill

The Associated Press

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RALEIGH — The North Carolina Senate's version of an omnibus tax bill remained intact Wednesday after several Democratic amendments were defeated, including one that would have lifted the scheduled repeal of certain municipal business taxes next summer.

The full Senate gave tentative approval to the wide-ranging legislation, tweaking several portions of the 2013 tax overhaul but also levying an excise tax on electronic cigarettes for the first time.

The differences between the Senate and House versions of the bill reflect the divisions among the Republican leaders of each chamber when it comes to how they want to change the state's fragmented privilege-license-tax system. Most legislators and municipal leaders agree the system should be reformed, but haven't agreed how.

While the House bill would replace the system on July 1, 2015, by capping the annual privilege license tax — the tax for the privilege of doing business within a local area — at $100 per entity, the Senate measure would eliminate the tax altogether on the same date, at a loss of more than $62 million annually, according to bill researchers.

"We realize that we are under the gun and need to fix this" prior to the deadline, the bill's floor manager, Republican Sen. Bill Rabon on Brunswick County, said before the 37-9 vote. About half of the Democrats ending up voting for the final product.

Republicans pushed back an amendment by Democratic Sen. Joel Ford of Charlotte, whose town stands to lose $17 million with the repeal and, like other cities, could face increased property taxes, reduced government services, or both, to make up for lost revenue. Ford proposed a three-tiered privilege license based on the company's number of employees, capped at $100, $200 and $1,000, respectively. Ford said his proposal resembled an idea offered by the North Carolina League of Municipalities, which wanted to preserve the current level of revenues for towns and cities they represent.

Companies have been "looking for some consistency and uniformity in how the tax was levied across the state," Ford said of the amendment, which "removes this cliff that we have placed cities on after the next year." Rabon said there were some good ideas in the amendment but it hadn't been properly reviewed by interested parties.

The municipalities say they could lose about 10 percent of the $62 million in the coming year from the bill because the tax would be permitted only upon businesses located within a city's limits in the year before the repeal, not outside the city limits. Both versions create a new e-cigarette tax equal to 5 cents on every milliliter of the liquid used in e-cigarette cartridges. The need for replacement cartridges varies by user.

Republicans defeated another amendment by Sen. Ben Clark, D-Hoke, that would link the excise tax to the concentration of nicotine in the cartridges. The excise tax would be higher and at times closely resemble the 45-cent tax on a pack of tobacco cigarettes.

Other Democratic amendments defeated would have allowed more nonprofit groups to remain exempt from sales taxes on concerts and entertainment events and held back changes to how home-improvement companies pay the sales tax on items they install.

The measure could receive a final Senate vote Thursday. The House will have to accept the Senate changes or enter negotiations to find a compromise.

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