North Carolina General Assembly Week in Review – Spotlight on School Return and Tax Policy

July 17, 2020

Pardon Our Dust

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Earlier this week, Governor Cooper announced that it may be necessary to call a special session to address the allocation of new federal funds and fill budget shortfalls caused by the pandemic.  The General Assembly is not due back in Raleigh until September 2, per the adjournment resolution passed two weeks ago. Legislators may return earlier than expected if Congress approves a new coronavirus relief package in the coming weeks. When legislators come back to Raleigh for their scheduled return in September federal COVID-19 fund allocations and appointment bills will be on the calendar. 

As of Thursday morning, in the state of North Carolina, there were 94,426 confirmed cases of the coronavirus, 1,312,757 completed tests, 1,598 deaths, and 1,134 current hospitalizations. Due to the continued spike, Governor Cooper announced that North Carolina will remain in Phase 2, Safer at Home after the current Executive Order expires today. Thursday evening, Governor Cooper signed Executive Order 151: Extension of Phase 2 Measures which will pause the state in Phase 2 until August 7. 

As we all continue to feel the effects of the global pandemic and adjust to a new normal, we want to highlight a few ways our clients across North Carolina have worked to support residents and make this time a little easier for those throughout the state. Read more about what our clients are doing to help by clicking here.

For more information on COVID-19 in North Carolina, click here to visit the Department of Health and Human Services website, and be sure to stay up to date on the latest federal guidelines issued by the Centers for Disease Control and Prevention (CDC) by clicking here.

School Return 

Tuesday, Governor Cooper announced that K-12 schools in North Carolina will be allowed to re-open this fall under “Plan B.” Initially, Governor Cooper encouraged school districts to choose one of three plans that would fit their needs the best. The plans were:

  • Plan A: In-person instruction with minimal social distancing 
  • Plan B: Increased social distancing with schools at no more than 50% capacity and buses at no more than 33% capacity; a mix of in-person and online instruction allowed
  • Plan C: Remote instruction only

Under Plan B, schools will be required to adhere to the following safety measures:

  • Require face coverings for all teachers and students K-12
  • Limit the total number of students, staff and visitors within a school building to the extent necessary to ensure six feet of distance can be maintained when students/staff will be stationary 
  • Conduct symptom screening, including temperature checks 
  • Establish a process and dedicated space for people who are ill to isolate, and have transportation plans for ill students
  • Clean and disinfect high-touch surfaces in the school and transportation vehicles regularly
  • Require frequent hand washing throughout the school day and provide hand sanitizer at entrances and in every classroom
  • Discontinue activities that bring together large groups 
  • Limit nonessential visitors and activities involving external groups 
  • Discontinue use of self-service food or beverage distribution 

School districts will also have the choice to operate under “Plan C” if deemed the best option. In just four days, Wake County saw 20% of its student population apply for its Virtual Academy. The Virtual Academy will provide all core classes online for students who may have a higher risk of infection or for those whose parents are not comfortable with in-person instruction. 

Tax Policy

The General Assembly considered and passed two important tax bills that were signed into law this session, Senate Bill 704: COVID-19 Recovery Act and House Bill 1080: Revenue Laws Recommendations.

Senate Bill 704 passed both chambers unanimously. Tax policy highlights of the bill include:

  • The bill  waives the accrual of interest on an underpayment of tax imposed on a franchise, corporate income, or individual income tax return, including a partnership and estate and trust tax return, from April 15, 2020, through July 15, 2020. It does not waive the accrual of interest on the tax payment extension of the other tax types
  • Any claims for a refund of income or franchise tax  due between April 15, 2020 and July 15, 2020, are considered on time if they were filed by July 15, 2020
  • Affirms the flexibility to administer unemployment compensation, as allowed by Executive Orders No. 118 and 131, and encouraged by Congress under the Families First Coronavirus Response Act
  • The flexibility extends to the following: determination of unemployment, elimination of the waiting week, work search requirements, attached claims, and non-charging of employer accounts
  • Allows a claimant to satisfy one of the weekly job contacts by attending a reemployment activity offered by a local career center that the Division of Employment Security has verified as a suitable credit toward the work search requirement
  • Allows an employer to file an attached claim when the unemployment is due directly to a disaster covered by a federal disaster declaration
  • Provides that a lien for county property taxes does not take priority over a previously filed lien for past due contributions 
  • Makes the Joint Legislative Oversight Committee on Unemployment Insurance a permanent interim committee
  • Requires the Division of Motor Vehicles to extend the validity of vehicle registrations and certain other credentials that would otherwise expire between March 1, 2020 and August 1, 2020 for five months

The bill was signed into law by Governor Cooper May 4, 2020.

House Bill 1080 passed the House 101-9 and the Senate 47-1. Tax policy highlights of the bill include:

  • Conforms to the exclusion from gross income of any amount of indebtedness forgiven on a loan covered under the Paycheck Protection Program
  • Conforms to the reduction of the threshold amount for the medical expense deduction from 10% to 7.5% for 2019 and 2020
  • Sets and codifies the insurance regulatory charge used to fund the Department of Insurance at 6.5%
  • Extends the Job Development Investment Grant (JDIG) from January 1, 2021 to January 1, 2030
  • Extends the Natural Gas Economic Development Infrastructure Cost Recovery program from July 1, 2021 to July 1, 2026

The bill was signed into law by Governor Cooper June 30, 2020.

Another notable tax-related bill that passed during short session is Senate Bill 808: Medicaid Funding Act which does the following: 

  • Sets the rates for the revised assessments for the first taxable year, which is October 1, 2020, through September 30, 2021.
  • Adds prepaid health plans to the types of organizations subject to the gross
    premiums tax and the insurance regulatory charge
  • Includes capitation payments for the Medicaid or Health Choice programs received by a prepaid health plan in the tax base on which the gross premiums tax is imposed
  • Establishes a tax rate of 1.9% for prepaid health plan gross premiums, which is the same rate applicable to other insurance contracts
  • Specifies the intent of the General Assembly to enact changes to Medicaid non-tax revenue prior to the start of the 2021-2022 fiscal year

The Bill was signed into law by Governor Cooper July 2, 2020.

Upcoming Legislative Meetings

Monday, July 20
10:00 AM: North Carolina Child Well-Being Transformation Council