RALEIGH — One of the least publicized but more significant pieces of legislation this session is about to land on the governor's desk.
Supporters say the bill would help multistate corporations know what income they have to report in North Carolina, but critics say it could hamstring the state's efforts to go after those that abuse tax shelters. It tentatively passed the House on a 74-32 vote Friday, and previously cleared the Senate.
Final approval came this morning, when the House voted 79 to 29 to pass the legislation. There was no opposition in the Senate.
It was among dozens of bills the General Assembly waded through Friday as members worked toward the end of the session. The House met all day, and the Senate convened at night; the House planned to wrap up its business in a morning session today.
Rep. Jennifer Weiss, a Cary Democrat, was among the House Democrats who spoke forcefully against the bill, HB619, calling it legalized tax evasion.
"We are telling multistate corporations, 'Come on over, rip us off, we won't charge you any taxes, but we're going to tax the little guy,' " Weiss said. " 'Go ahead, cheat us, it's legal.' "
But several Republican House members were just as adamant that Weiss didn't understand the bill.
"It's extremely important to the economy of North Carolina," said Rep. Paul Stam, an Apex Republican. "Of all the bills we've had this session, this is the jobs bill."
The legislation would make it more difficult for the state to seek extra taxes, interest and penalties from corporations that game the system by obfuscating their "true earning" in North Carolina by shifting money to related entities, said Edwin McLenaghan, a policy analyst with the N.C. Budget & Tax Center, a liberal advocacy group.
The most prominent example was the state's assessment of more than $30 million in taxes, interest and penalties against Wal-Mart after the nation's largest retailer established a complex corporate structure designed to lower its state income tax by, in essence, paying rent to itself and paying dividends to different entities. Wal-Mart unsuccessfully challenged that assessment in court.
Currently, the secretary of the Department of Revenue can order a company to file a combined tax return for related entities if the corporate structure's primary aim is reducing its state income tax. But the bill would make those structures defensible if there was a "reasonable business purpose" in addition to the tax benefits.
In fiscal 2009-2010, according to the N.C. Budget & Tax Center, the state collected $424 million in tax revenue from corporations that tried to abuse tax shelters by requiring related businesses to file a combined return.
Election laws wait
Sweeping changes to North Carolina election laws are on hold for at least a month.
Legislation that would shorten the early-voting period, end straight-ticket voting and return to the partisan election of judges - as well as bills that would create a new agency for oversight of campaign finance and lobbyists - has been deferred to a special July session of the General Assembly. Lawmakers are expected to return July 13 to take up redistricting plans for Congress and the legislature.
Late Thursday night, Rep. David Lewis, R-Harnett County and chairman of the House Elections Committee, announced that the election changes would be considered in July, not this week. The House did make one change to the bill: It restored Sunday early voting. The Senate would have to concur.
Grassroots anger of landowners whose property was scooped into nearby cities and towns is leading to a major change in North Carolina's laws allowing municipal annexation whether people like it or not. The House voted 102-7 to give final legislative approval to the broadest rewrite of the state's involuntary annexation laws in more than half a century.
The biggest change would let property owners block an annexation if 60 percent of them sign a petition of opposition. The town or city would be barred from trying again for three years. Landowners whose property is being annexed now have few options other than going to court. The annexation laws were established and defended for decades by municipal officials who said they ensured that cities grew at a manageable rate.
The House adopted a regulatory reform bill compromise that includes giving state employees the right to have administrative law judges, rather than the State Personnel Commission, make the final decision in disputes.
Senate Democrats on Thursday had insisted on including that provision, which they said was key to their approval of a bill that environmentalists don't like because they fear it would weaken protections. House Republicans don't want the state Department of Natural Resources, specifically, and other state agencies in general to have the last word on permitting and other disputes.
But they decided at the last minute to exempt the State Personnel Commission from that requirement, causing Senate Democrats to balk. A conference committee restored the personnel commission, and the House signed off on that Friday. The Senate was expected to approve the compromise on SB781 Friday night.
Other highlights from Friday include:
The legislature won't take up the redistricting of North Carolina's Congressional and legislative districts until July, but some proposed maps of the new GOP-drawn districts were released late Friday afternoon. The proposed state House and Senate maps of districts intended to comply with the federal Voting Rights Act to ensure representation for racial minorities were released.
It looked like a compromise between the House and Senate had been reached in HB36, but Rep. George Cleveland, a Republican from Onslow County, withdrew the conference committee report from the House calendar at midday.
The bill the House had sent to the Senate required all employers with more than 25 employees to use the federal E-Verify database to determine the immigration status of new hires. But the Senate altered that to require only contractors who do business with public entities in the state.
The compromise that had been reached returned the requirement to all employers. The bill also requires cities and counties to participate in the electronic system. Cleveland didn't say why he withdrew the report.
The House didn't concur with changes the Senate made to a bill that would introduce a "Choose Life" license plate. The change occurred in another provision of the bill, and the Senate decided to do away with colored backgrounds on plates. That dispute has brought the bill to a halt for now.
Charlotte Observer staff writer Jim Morrill and The Associated Press contributed.