Brooks Pierce Capital Dispatch: What Businesses Need to Know About the 2023 North Carolina Legislative Session
The North Carolina General Assembly left Raleigh on October 25 after enacting a biennial two-year budget and acting on bills on a variety of topics. Legislators are scheduled to return for next year’s session starting April 24 although they may return before then on certain dates specified in the adjournment resolution (S 760) for purposes such as veto overrides and conference committee reports.
Here are some items of interest to businesses from this year’s session:
Significant economic development investments were made
The new budget law (H 259) appropriates about $2 billion for over 200 water and sewer projects, $500 million over two years to NC Innovation, a private, nonprofit corporation focused on facilitating commercialization of research from North Carolina universities, and $5 billion over the biennium to the State Capital and Infrastructure Fund (SCIF) for a variety of projects including at state agencies and UNC.
The tax code was changed
The budget law (H 259) accelerates planned cuts to the state’s personal income tax rate. The current rate, which is 4.75 percent, will fall to 4.5 percent in 2024 with additional reductions in future years if certain revenue collection “triggers” are met. The law also caps the franchise tax paid by certain businesses and extends sales tax exemptions for motorsports, senior care facilities, aviation, fuel for freight boats and breast pumps.
Medicaid insurance coverage was expanded
Enactment of the state budget bill (H 259) means that expansion of Medicaid health insurance coverage passed in an earlier bill (H 76) will occur. The expansion is slated to be effective December 1, 2023 and could extend coverage to over 600,000 North Carolinians. Among other things, the expansion could also benefit rural hospitals given that many of their patients are uninsured.
Transportation funding was increased
The budget law (H 259) appropriates $3 billion for FY 24 and $3.2 billion for FY 25 for the Highway Fund (used primarily for existing infrastructure) and $2.3 billion for FY 24 and $2.45 billion for FY 25 for the Highway Trust Fund (used primarily for construction). To help fund this spending, the law raises annual fees paid by electric vehicle owners from $140.25 to $180, creates a new $90 fee for plug-in hybrid vehicle owners, and imposes a new excise tax on rideshare services (e.g., Uber and Lyft) of 1.5 percent for exclusive rides and 1 percent for shared rides.
Sports wagering was legalized
A bill (H 347) to authorize, regulate, and tax sports wagering on sports was enacted. It also legalizes pari-mutuel wagering on horse racing.
The North Carolina Lottery Commission will be responsible for regulating sports wagering. Wagering will be either interactive (for example, on electronic devices such as “smart” phones) or at certain sports facilities or a place of “public accommodation” associated with such facilities.
The list of facilities eligible for in-person wagering includes the Charlotte Motor Speedway, Bank of America Stadium in Charlotte (home of the NFL Carolina Panthers), the Spectrum Center in Charlotte (home of the NBA Charlotte Hornets), the PNC Arena in Raleigh (home of the NHL Carolina Hurricanes), and the WakeMed Soccer Park in Cary (home of the National Women’s Soccer League Carolina Courage). Wagers will be allowed on professional sports, college sports, electronic sports, amateur sports or other events approved by the Lottery Commission.
A privilege tax of 18 percent will be levied on each interactive sports wagering operator with proceeds going to a variety of purposes including grants for youth sports and to certain UNC school athletic departments. Of the remaining funds, 30 percent will go to a new Major Events, Games and Attractions Fund to attract events to North Carolina and 50 percent will go to the state’s General Fund, which funds most state entities other than transportation.
Educator and state employee salaries were increased
Over the two-year biennium, the budget law (H 259) increases salaries for K-12 teachers by about 7 percent with similar increases at UNC and community colleges. In addition, state employee salaries will increase by about 7 percent and there is a one-time cost-of-living adjustment of 4 percent for state employee and teacher retirees.
Some business regulations changed
The Regulatory Reform Act (H 600) was enacted when the General Assembly overrode Gov. Roy Cooper’s veto of the bill. The bill includes provisions on a variety of topics including watersheds, stormwater, fish harvests, drinking water, environmental permitting, disposal of lithium-ion batteries and solar panels, and nonprofit raffles.
In addition, the budget law (H 259) prohibits state or regional emission standards for new motor vehicles (this prohibits adoption of an Advanced Clean Truck rule adopted by some other states) and prohibits cap and trade requirements for carbon dioxide (CO2) emissions.
New election districts were created in advance of 2024 elections
Legislators drew new State Senate, State House, and congressional districts prior to leaving Raleigh. Candidate filing opens on December 4 and closes December 15.
In addition to all 170 legislative seats being on the ballot, other offices up for election are President, 10 statewide Council of State offices (which includes Governor), all 14 U.S. House seats, and the appellate courts (one Supreme Court and three Court of Appeals seats).
Significant policy issues may be considered in 2024
When legislators meet in 2024, they will consider adjustments to the FY 25 (July 1, 2024 to June 30, 2025) budget. Other issues that may be considered include:
- Legalization of casinos and video lottery terminals
- Medical marijuana (S 3)
- Alcoholic Beverage Control (ABC) law changes (S 527)
For more information, contact the Brooks Pierce Government Affairs Team, linked below.