Tax Reform Debate Heats Up in Raleigh

AccountingThe debate over Tax Reform is well underway in the North Carolina Senate, as the Finance Committee continues to hold regular hearings on  a series of bills sponsored by members on both sides of the aisle.

SB 363, “Business Tax Reduction and Reforms,” was the first piece of out the gate. Filed by Senator Andrew Brock (R-Iredell), it would repeal the authority for cities and counties to assess local privilege license taxes and replace the state’s complex corporate franchise tax with a 0.135% annual business privilege tax paid by all North Carolina businesses, including those with limited liability (LLCs and LLPs). The tax would be assessed on the business entity’s net worth, defined as the entity’s total assets less its total liabilities, depreciation and amortization. There would be a minimum annual tax of $500 and a maximum of $5,000 on business entities other than corporations, and a maximum tax of $75,000 on holding companies. Companies that pay the new tax would be exempt from paying sales tax on business-to-business transactions, such as building materials, office supplies, accounting or legal services, and so on.

Senator Bob Rucho (R-Mecklenburg), one of the bill’s co-sponsors, told Charlotte NAIOP members last month that the intent of SB 363 is to create a source of revenue that would allow for the immediate reduction, and eventual elimination, of both the corporate and personal state income taxes. The Matthews senator has sponsored a pair of companion bills, SB 669 and SB 677, which do just that dropping the top personal income tax rate from 7.75% to 4.0% percent, and the corporate tax rate from 6.9% to 6.0% by 2016.

Earlier this year, Rucho laid out a comprehensive tax reform strategy that included a 1.0% Business License Fee and a 1.0% Real Estate Conveyance (Transfer) Tax — proposals strongly opposed by REBIC, the North Carolina Association of Realtors® (NCAR) and the North Carolina Home Builders Association (NCHBA). While the Business License Fee in S 363 is far lower, it would still tax companies on assets and holdings that may not be producing income, and is therefore a source of concern.

Another comprehensive effort to reform North Carolina’s tax system was outlined in legislation filed recently by Senator Dan Clodfelter (D-Mecklenburg). SB 394, “Lower Tax Rates for a Stronger NC Economy,” would immediately establish a flat 6.0% tax rate on both personal and corporate income, and modestly expand the sales tax base to dozens of now-untaxed services, including landscaping, pest control and concert tickets. It would also eliminate dozens of specific tax deductions, including the NC mortgage interest deduction, and replace them with a flat .6% annual tax credit. The bill would also impose a 0.125% Business Privilege Tax on all limited liability firms in the state, a rate sightly lower than that proposed in the Brock legislation. And as with SB 363, Clodfelter’s bill would eliminate all local business license taxes, a proposal already creating angst among cash-strapped counties and cities across North Carolina.

REBIC and other industry trade groups are continuing to analyze these bills, and will continue to keep you appraised of these and other Tax Reform proposals as they advance through the General Assembly.

Mecklenburg County Forming Advisory Committee to Review Regulatory Roadblocks for Small Biz

Gvmt Center 2At the recommendation of Commissioner Matthew Ridenhour, the Mecklenburg County Board of Commissioners this week approved the creation of a new citizens advisory board to look at ways to streamline the regulatory process for small business owners and entrepreneurs.

The Small Business and Entrepreneurship Advisory Board will be composed of 11 members (one will be appointed from the existing city Business Advisory Committee), and is charged with the following responsibilities:

“To provide recommendations and advice to the Board of County Commissioners regarding ways to streamline permitting processes for new and expanding businesses; to provide input to the Board of County Commissioners regarding proposed changes in building codes, policies, and taxes; to advise the Board of County Commissioners about specific challenges small businesses and entrepreneurs encounter in the county; and to inform the Board of County Commissioners about new developments in the local small business and entrepreneurial communities.”

Board members must be residents of Mecklenburg County, and should have recent experience in opening or managing a small business enterprise. Six members will serve initial terms of 3-years, with the other five members serving for 2 years. All subsequent terms will be for 2 years, and members may serve no more than two terms.

Applications will be accepted through April 30, and the Board of Commissioners will make appointments at its May 21st regular meeting. If you’d like to apply, please CLICK HERE and scroll down to “Small Business and Entrepeneurship,” about 2/3 of the way down for a link to the application.

CALL TO ACTION! Tell Your Senator to Vote YES on HB 150!

legbuilding

Thanks to your help, a bill that would limit the ability of local governments to require architectural and design controls on single-family homes, duplexes and townhomes, PASSED the North Carolina House by a vote of 98-18 last week, with the support of Mecklenburg County’s entire delegation! It now heads to the State Senate, where it could be heard in the Rules Committee as early as the second week of April.

Now, we need you to pitch in again to let our state Senators know how important this bill is for our industry and for housing affordability in North Carolina!

 Here’s what you can do:

  1. CLICK HERE to generate an e-mail to all Charlotte-area Senators.
  2. In the subject line, add, “Please vote YES for HB 150!”
  3. Copy and paste the letter below into the body of the e-mail. Feel free to include any specific examples you can provide about the cost that local aesthetic design regulations have had on your business and your customers:
  4. Add your signature and hit SEND!

Dear Senator:

HB 150 “Zoning/Design & Aesthetic Controls” will be before you in the coming days after being voted out of the State House by a margin of 98-18. On behalf of the North Carolina Home Builders Association and the North Carolina Association of REALTORS®, I urge you to vote ‘YES’ for this bill.

Local governments are currently imposing residential design mandates through both by-right requirements and zoning conditions that add to the cost of housing and infringe upon consumer choice. These mandates include minimum house size, incorporation of certain color schemes, requirements on exterior cladding material, garage size and placement, minimum window spacing, and façade design, among others.

Unlike elements of the building code, which regulate consumer health and safety, these aesthetic design requirements are non-structural in nature and serve no legitimate public purpose.  Local governments across North Carolina currently apply design requirements through zoning to all types of residential development, even though they DO NOT HAVE STATUTORY AUTHORITY to do so.

HB 150 clarifies that zoning ordinance regulations on “building design elements” may not be applied to residential structures governed by the NC Residential Code (one and two family dwellings and townhomes). This legislation does not prohibit design requirements pertaining to local historic districts or areas listed on the National Register.  It does not interfere with neighborhood covenants or private contracts. And it DOES NOT prevent property owners from freely offering architectural conditions as part of a rezoning or development approval. It will, however, ensure that housing in North Carolina remains affordable, and preserve the rights of builders and consumers to decide what their home should look like.

Please vote YES for HB 150, and help protect housing affordability and consumer choice in North Carolina!

Sincerely,

HB 150, “Zoning/Design & Aesthetic Controls” would restrict the ability of local governments to place costly architectural and aesthetic design requirements on residential construction. Sponsored by Representative Bill Brawley (R-Matthews), it closely mirrors SB 731, which was introduced in 2011 by Senator Dan Clodfelter (D-Charlotte) to rein in cities and towns that have been exceeding their statutory authority by regulating the architectural design of new homes. Clodfelter, along with freshman Senator Jeff Tarte (R-Cornelius) — a former town former mayor — is a primary sponsor of SB 139, a companion bill filed in the Senate.

Should either of these bills become law, local towns like Davidson, Mint Hill and Huntersville would have to make substantial changes to their zoning codes, which currently regulate architectural elements such as garage placement and exterior materials. Passage would also permanently sideline an effort underway by the City of Charlotte to adopt residential design standards limiting the length of blank walls and mandating garage setbacks from the front facade.

NC Building Code Council Approves Amendment to Fix Residential Firewall Requirement

ConstructionThe North Carolina Building Code Council has approved a requested amendment to the 2012 NC Residential Code that would correct a firewall issue now causing headaches for builders around the state.

The requested change, submitted by the North Carolina Home Builders Association (NCHBA), would reduce the required minimum fire separation distance from 5′ to 3′, where it was before the new code went into effect on March 1.

If approved by the Rules Review Commission next month, the change would eliminate the need for home plans to be redesigned with fire-rated exterior walls in order to be built on one of the hundreds of platted and developed lots in Mecklenburg County with side yards measuring less than 5′.

Under the current code, any home constructed less than 5 feet from the property line is required to have a 1-hour rated wall, with openings on no more than 25% percent of the surface.  Any home constructed less than 3 feet from the property line is required to have a 1-hour rated wall, with NO openings (windows or doors) allowed. If the code language is NOT amended, the following problems will continue to occur:

  1. Hundreds of lots in Mecklenburg County may lose value because they can only accommodate a much smaller home.
  2. Very small lots may be unbuildable, especially in TND neighborhoods.
  3. Builders may have to create new product for these lots costing significant time and money.
  4. The fragile housing industry in NC could lose momentum costing jobs and tax revenues.

Thanks to NCHBA’s Robert Privott for leading the charge on this critical amendment, as well as to everyone who e-mailed members of the Building Code Council, or testified at last December’s public hearing, to get this change approved!

Building Code Consistency Legislation Passes House; Moves to Senate

Construction 2Overcoming strong opposition from environmental groups and code officials, a bill to improve North Carolina’s building code and create greater consistency in local inspections was approved by the North Carolina State House last week by a 99-18 vote. It now moves on to the Senate for consideration.

HB 120, “Building Codes, Local Consistency” is a bipartisan effort sponsored by Representatives Bill Brawley (R – Matthews) and Tricia Cotham (D – Charlotte) among others. Representative Cotham has been a particularly vocal advocate for the bill, and spoke in favor of it on the House floor last Monday night, relating her personal frustration with Mecklenburg County’s code officials when she was trying to open a drop-in child care business earlier this year.

If HB 120 becomes law, it will impact the code inspection process in three important ways:

  • It would prevent local building code departments from requiring any more than the 8 inspections currently authorized under the North Carolina Building Code Council’s Administrative Code. It would NOT, however, limit the NUMBER of re-inspections that could be performed to ensure work is done according to code.
  • It would extend the existing building code revision cycle for residential construction from 3 years to 6 years. However, it would allow local code departments and individuals to petition for code revisions at any time. Extending the cycle would save money for builders, inspection departments, design professionals and others who must purchase the new codes and receive training on their implementation without sacrificing residential building performance or safety.
  • It would direct the Department of Insurance (DOI) to make written and electronic code interpretations and all appeal decisions made by the Building Code Council available to the public by posting them on the Building Code Council’s website and by publishing them in the NC Register at least semi-annually.  Making these routine interpretations and appeal decisions available to jurisdictions across the state will result in consistent code enforcement, prevent unnecessary inspection delays and act as a quick reference for local code officials for sections of the code that may be difficult to understand.

REBIC and the North Carolina Home Builders Association support HB 120 and are lobbying for its passage by the State Senate. We will keep you posted on its progress in the coming weeks.

Mecklenburg County Implements Mechanic’s Lien Agent Policy Starting April 1

iStock_000005457175XSmallStarting April 1st, Mecklenburg County Code Enforcement will require all commercial and residential permit applications valued at $30,000 or more to designate a title company to act as a Lien Agent for that project, in compliance with Senate Bill 42, which Governor Perdue signed last July.  The only exception to the law is for the owner of a single family home who is building an addition to his own home.


What steps do I need to take to meet compliance?

Select a registered Lien Agent for your project. You should visit the Department of Insurance website to obtain information on approved designated lien agents.

At the present time, no registered agents are listed on the DOI website, but we are working with Mecklenburg County to determine how they will deal with this. In the meantime, we encourage you to contact your title insurance company to ensure that they are planning to register as a lien agent in North Carolina

When I have selected a Lien Agent for my project, what next?
Once you have determined your designated lien agent, the county will require that information to be listed on the building permit application. For permits being completed online, there are required fields that will ask for this information. If you are making a paper submission, please provide this information in the general note areas which is located at the bottom of the application.

This information has three parts that are critical in order to to meet compliance:
1. Name of the title insurance company to act as lien agent.
2. Physical and Mailing address, facsimile number and electronic mail address to which notices may be delivered to the lien agent.
3. Telephone number of the lien agent.

Note: The county will accept a letter on your company letter head with that information in lieu of it being placed on the paper permit application.

Once the building permit is issued, this information will also have to be posted on the construction site with the permit placard.

If you change your lien agent after the building permit been issued, these changes must be relayed to the Code Enforcement Department so necessary changes can be made to the permit application. An additional charge will be applied to complete the transaction.

What permitting processes will be affected with this new Lien Law?
Currently, Code Enforcement is working to make this a seamless process and be totally electronic by the customer. With the short notice, all process will have additional steps to help verify compliance of this law.

How do I get more information about the Mechanic’s Lien Law?
You can contact Bryan Heckle at Property and Casualty Division of the Department of Insurance at (919) 733-3366 or email at P&Cinbox@ncdoi.gov.

Davidson Eliminates its Adequate Public Facilities Ordinance

DavidsonDavidson Town Board voted unanimously to removing a Adequate Public Facilities Ordinance (APFO) from its zoning code Tuesday night, just over a year after settling a developer’s lawsuit over the statute.

First adopted in 2001, Davidson’s APFO required residential developers to determine whether adequate infrastructure capacity exists before their project could be approved. If it was determined that the existing public facilities (roads, parks, police and fire service) were inadequate to serve the proposed development, the project would be denied unless the developer agreed to pay to bring them up to the town’s desired level of service.

A Planning Ordinance Diagnostic Report completed in January by an outside consultant recommended eliminating the APFO, as the town’s facilities currently meet or exceed the desired level of service called for in its Capital Improvement Plan. In February, Davidson’s Planning Board voted 9 – 1 to support that recommendation.

REBIC believes that APFOs are ineffective means to address the needs of future growth and unfairly place the burden of paying for infrastructure on a community’s newest residents. Equitable funding of local capital improvements requires all members of a community pay for public infrastructure, not just the newest arrivals. We applaud Davidson for eliminating its APFO and look forward to working with the town on more effective strategies to plan for growth.