REBIC, NCAR, NCHBA and NAIOP continue to engage with the North Carolina General Assembly on tax reform issues that affect the real estate industry, as the 2013 session draws to a close.
After a week of hectic activity, the NC Senate overwhelmingly approved a Substitute to HB 998, the tax reform proposal passed by the House last Monday night. At this point, the House and Senate have each passed distinctly different Tax Reform plans, and the leadership from both chambers will shortly be appointing a Conference Committee to work out a compromise proposal, likely behind closed doors. Here’s how the plans stack up:
The House version of HB 998 does the following
Eliminates North Carolina’s three-tiered personal income tax bracket system and replaces it with a 5.9% flat rate;
Includes mortgage interest and property tax deductions, capped at $25,000 for married couples filing jointly and $12,500 for single filers. the following caps:
Allows unlimited charitable deductions;
Reduces the corporate income tax rate from 6.9% to 5.4%, and reduces the franchise tax by more than 10%;
Modestly expands sales tax to the installation or servicing of tangible material goods, like car repairs, computer warranties, or furniture delivery, while reducing the rate from 6.75% to 6.65% in 2014.
The Senate substitute to HB 998 does the following:
Eliminates North Carolina’s three-tiered personal income tax bracket system and replaces it with a 5.4% flat rate (will drop to 5.25% by 2015)
Eliminates all credits, exemptions and deductions entirely—including all mortgage interest and property tax deductions;
Eliminates the corporate income tax by 2017;
Eliminates hospitals’ nonprofit status;
Taxes Social Security benefits;
Modestly expands sales tax to amusements and entertainment, but excludes food and medicine;
Raises LLC fees from $200 to $750 and S-Corp fees to $5,000.
With an ensuing fraction in the Senate Republican Caucus, Sen. Bob Rucho resigned last week as co-chair of the Senate Finance Committee over his disagreement on tax reform with Senate Pro Tem Berger. The following day, Senator Berger politely rejected Rucho’s resignation from the position. REBIC and NCAR are advocating for passage of the House Tax Reform package, as it is the most equitable approach for North Carolina businesses and homeowners alike. We’ll continue to keep you appraised of the progress on this critical issue in the coming days.