Legislative Report 13-25 July 18, 2013 Tax Reform Bill Sent to Governor McCrory The Senate and House gave final approval to the conference report on House Bill 998, the Tax Simplification and Reduction Act, and sent the bill to the Governor on Wednesday for his signature. Governor McCrory is expected to sign these changes to the state tax code into law this weekend. The final version of HB 998 represents a compromise between the two very different perspectives on a state tax code overhaul that were presented in earlier House and Senate bills. The specifics of House Bill 998 are presented below. State Income Taxes • The three-tiered system with income tax rates of 6, & and 7.75% is replaced by a single flat rate of 5.8% for the 2014 tax year and 5.75% in 2015. • Personal exemptions are eliminated and the standard deduction is increased to $7,500 for individuals and $15,000 for joint filers. • The deductions from adjusted gross income ($4,000 for governmental retirees and the $2000 for private sector retirees) are eliminated. • Taxpayers still may itemize deductions but there is a combined cap of $20,000 on the amount that may be deducted for home mortgage interest and local property taxes. • Social Security income and Bailey vested state and local government retirement benefits remain exempt from state income taxes. Sales and Other Taxes • The excise taxes on electricity and natural gas are repealed and are replaced with a combined 7% state and local sales tax. • Extend sales taxes to service contracts. • The state tax on estates is repealed. Action on Other Bills This Week House Bill 359: Retirement Administrative Changes Act of 2013 (Primary Sponsor-Rep. Moffitt) This bill proposes several important changes to the state retirement systems as described below. • The transfer benefit option that is available to state and local retirees who have 401(k) and 457 plans is extended to retired educators who participate in the NC Public School Teachers’ and Professional Educators Investment Plan (403b Plan). • The bill clarifies the timing of the Social Security offset for Long-Term Disability Benefits. • The bill would establish a Qualified Excess Benefits Arrangement (QEBA) effective January 1, 2014 to comply with section 415(b) of the Internal Revenue Service Code which limits pension benefits of certain highly compensated retirees. House Bill 359 was approved by the Senate and will be returned to the House for concurrence in changes made by the Senate. Senate Bill 558: Treasurer’s Investments (Primary Sponsor- Senator Hise) This bill gives the State Treasurer greater flexibility in the choice of investment instruments for the assets of the state and local governmental retirement systems. The purpose is to allow further diversification of the investment portfolios for the retirement systems. The bill modifies the separate percentage limitations on five categories of investments and establishes a group percentage limit. The investment categories generally are referred to as alternative and include: various trusts including real estate trusts; securities, including asset-backed securities; limited liability vehicles; and inflation-linked bonds, timberlands, and commodities. The percentage of the assets of the retirement systems that may be invested collectively in these categories is increased from 34% to 40% of retirement system assets. Furthermore, the Treasurer may not invest more than 15% of retirement system assets in any one category of the alternative investments. The bill also requires the State Treasurer to include information in the regular quarterly investment reports describing how increases of 3% or more in the market value of any of the alternative investments complies with the statutory duties of the Treasurer as fiduciary for the retirement systems. Senate Bill 558 was approved this week by the House Finance Committee on a close vote of 14 to 13. The bill will be scheduled for consideration by the full House next week.
Posted on: Sun, 21 Jul 2013 12:51:47 +0000
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