Today, the House passed the HB 117 – The NC Competes Act, marking the first major jobs bill this session. HB 117 will now move to consideration in the Senate.
“I am proud of the hard work our House Members put into creating a smart and effective economic development package that is both pro-business and benefits North Carolinians in every corner of the State,” Speaker Tim Moore stated on Thursday. “Job creation is a top priority in the House, and the NC Competes Act is an important first step.”
“North Carolina has always been an attractive place to do business, but it’s vital that we keep our state competitive in a fierce global market,” said Rep. Susan Martin (R-Pitt, Wilson). Martin is a primary bill sponsor for the NC Competes Act, and functioned as a strong advocate for the package’s details. “It has been a thoughtful and collective effort by House Members, Governor McCrory, NC Commerce, and many local business leaders to identify the tools needed to assure we’d have a seat at the table. Our reform efforts to create an environment where jobs can grow; a low tax burden, fair regulatory environment, skilled workforce, and needed infrastructure; continues to be a huge part of the equation. We need these tools so that we make it into the competition and can demonstrate that North Carolina is open and ready for business.”
"Too many families are hurting from a broken economy, and too many business owners are stifled by high taxes,” Rep. Bob Steinburg (R-Camden, Chowan, Currituck, Pasquotank, Perquimans, Tyrrell) asserted. Steinburg is a primary bill sponsor for the NC Competes Act, and is a strong advocate for Northeastern North Carolina. “I’ve always been dedicated to creating the best climate for free-market innovation and job creation, and this bill - NC Competes - will help make that happen.”
Much of North Carolina’ recent job growth can be attributed to pro-business policies of reduced taxes, regulatory reform, and strategic investments:
- The North Carolina Unemployment Rate improved from 5th worst in 2012 (8.9%), to 23rd best in 2015 (5.5%).
- 200,000 new jobs have been created in the private sector since 2013.
- North Carolina is one of the fastest growing economies in the country, ranked 15th best by Business Insider.
“It should always be a collective goal to position North Carolina to become the commerce hub of the Southeast. NC Competes gives our State the edge we need to be competitive and pro-growth,” stated Rep. Charles Jeter (R- Mecklenburg). Jeter is a primary bill sponsor for the NC Competes Act, and was a vocal advocate on the House floor this week.
The NC Competes Act accomplishes the following:
1) Renames the current JDIG (Job Development Investment Grant) and the One NC discretionary incentive programs to more accurately describe them. Job Growth Reimbursement Opportunities: Job GRO – People replaces JDIG and Job GRO – Capital replaces One NC.
The Job GRO program is performance-based, accountable and effective. No money is disbursed to a company until the Secretary of Revenue certifies the amount of state withholdings from the newly created jobs.
"Companies want certainty and this legislation will send the message we're in the game and give them certainty. This is a program that is targeted, discretionary and creates a positive return on investment.”
-John E. Skvarla III, North Carolina Commerce Secretary
2) Makes $22.5M available for new commitments in 2015 to invest in growing jobs in North Carolina. The bill Increases the amount of Job GRO People funds available for new agreements by making $7.5M that would otherwise become available beginning in July, available now, and by adding $15M of additional capacity in 2015. Currently, the fund has been depleted and we have $25,000 available for projects until July 1.
“Increased funding of grants under the JDIG program is essential to continued economic development in the state. We use these funds as an economic development tool. Their immediate availability will make us competitive for projects that will go to SC or TX if the fund is not replenished.”
-Glen Webb, President-elect NCACC and Chairman of Pitt County Board of Commissioners
3) The Authority to make new Job GRO People commitments is extended until 1/1/2020. Currently, commitments are set to expire 1/1/2016.
Extending these commitments provides companies with confidence that North Carolina intends to remain a business-friendly environment for years to come.
“The fact that the economy is growing means there will be more projects to compete for, not that we in NC will automatically have growth. Yes, we need economic development tools like JDIG to bring home the projects for which we are all competing. When the selection process has narrowed the competition down to three communities which all have a strong labor force, excellent access and transportation, superior quality of place, and an industrial park fully served with all utilities, having access to the right economic development tools can determine who wins and who loses. We will get to the Economic Development Final Four repeatedly but never take home the prize if we can't compete in the last round.”
-Wanda Yuhas, Executive Director, Pitt County Development Commission
4) Transfers $20M that was appropriated last year for the Job Catalyst Fund into the Site Acceleration Fund – the fund that has proven results: utilized successfully to recruit Merck Pharmaceuticals. The Site Acceleration Fun has been inactive and depleted since the Merck Pharmaceuticals project.
The Site Acceleration Fund provides grants or forgivable loans to state agencies, non-profit corporations, locals, or businesses for acquisition and/or improvement of land and to lease property to a business that (i) will invest at least $100M in private funds in a project and (ii) will employ at least 100 new employees at the project.
The process for approval includes application to the Economic Investment Committee, performance criteria and remedies. It provides additional Economic Development Tools for strategic projects with appropriate controls and accountability.
“The Merck fund is a brilliant idea. It would have made Wilson more competitive in the Starbucks Project back in 2011.”
-Jennifer J. Lantz, Executive Director, Wilson Economic Development Council
5) Modifies the current statute for Single Sales Factor Apportionment for qualified capital intensive corporations. Single Sales Factor is one method of apportioning the business income of multi-state corporations for state income tax purposes. Most states use an apportionment formula based on a composite of three factors: property, payroll and sales. NC uses a double-weighted sales factor apportionment formula. Currently NC has adopted the single sales factor for “qualified capital intensive corporations” that invest at least $1B in a single facility in a Tier 1 or Tier 2 county over a 9 year period. HB 117 maintains the $1B investment threshold but eliminates the location requirement and the exclusion of coupling with other Job GRO programs.
“Among other provisions in the bill, single sales factor apportionment is critically important to our state’s manufacturers. Moving to single sales factor will apportion corporate business income on the sole basis of the portion of the corporation’s total sales that occur in the state. This will enable North Carolina to compete in this area as states like Virginia, South Carolina and Georgia have adopted or are phasing in single sales factor apportionment.”
-Gary J. Salamido, Vice President - Government Affairs, North Carolina Chamber
6) Extends the sales tax refund for passenger air carriers. Currently passenger air carriers are allowed a sales tax refund of sales tax paid on fuel in excess of $2.5M. This is set to expire 1/1/2016. HB 117 extends the current tax benefit for 4 years to 1/1/2020.
Without legislative action North Carolina will have the 5th highest jet fuel tax in the country next year, putting the state at a competitive disadvantage to retain and/or expand air services. Thirty five states already exclude commercial jet fuel from tax.
“We appreciate the House’s efforts to address the competitive tax environment in North Carolina and we look forward to continuing to discuss with legislators the economic benefits the airline industry provides the state.”
-Tracy Montross, Director of Government Affairs, American Airlines/US Airways
7) Data Center Infrastructure Act: Under current law, data centers pay 1% ($80 cap per article) privilege tax in lieu of a sales tax on certain equipment purchases if certain conditions are met: (i) $150M investment in Tier 1 or (ii) $225M investment in Tier 2 area over a 5-year period; $250M investment over 5 years to be exempt from sales tax on electricity.
HB 117 creates an additional sales tax exemption for data center equipment and electricity if $75M is invested over a 5-year period.
“As the demand for next-generation information services continues to grow, the need for data center infrastructure is increasingly essential for future economic growth. This bill helps insure that North Carolina remains an excellent place for companies to locate their high-tech operations.”
-Venessa Harrison, President, AT&T - North Carolina
8) More help for Tier 1 and Tier 2 Counties: Depending on the tier of the county where a project locates, a portion of the Job GRO ‘reimbursement’ is used to fund the Utility Account for infrastructure improvement projects that are reasonably anticipated to create jobs in Tier 1 and Tier 2 areas.
If a new project locates in a Tier 3 county, 25% is automatically diverted to the Utility Fund to benefit our most economically distressed communities. If a new project locates in a Tier 2 county, 15% is automatically diverted to the Utility Fund.
So, while companies are encouraged to invest in lower wealth areas, the program has built-in benefits regardless of where a new project chooses to locate.
“I’m excited to see investment into the more rural parts of our state. Smaller communities, like Gastonia and other towns in Gaston County are places that foster small business growth and value the jobs that larger businesses provide. As a city manager, I am constantly looking for ways to improve our utilities and roads in order to increase the marketability of our area. I know that continued utility investment can only be a good thing for Tier 1 and Tier 2 counties when it comes to job growth.”
-Ed Munn, City Manager, City of Gastonia