The Raleigh Report
From the Office of Cullie Tarleton
November 17, 2008
Small businesses are at the core of our nation’s economy and my fellow lawmakers and I know that the health and strength of these businesses is also critical to the well-being of our state. Here in the high country, small businesses make up the majority of the business community. That’s why I’m a strong supporter not only of our small businesses but the entire business community. I am an active member of our House Business Caucus. During the previous term, the General Assembly made several changes that we believe will help small businesses thrive and also improve conditions for their employees.
Most of the changes are tied to the state’s tax structure, but they touch on issues of health, consumer protection and research, as well as other areas. These important incentives will help small businesses owners stay competitive.
Thank you as always for your interest in the work of state government. Please feel free to contact me if I can be of any assistance.
Income Taxes
The General Assembly allowed a temporary income tax increase put in place during the economic downturn of 2001 to expire. This means that the highest tax rate is now 7.5 percent. Although this tax rate change affects individual taxpayers, it will be important for small businesses. Most small businesses are set up as pass-through entities. This means that profits pass through to the owners and are taxed at the rates applicable to the owner instead of at the general corporation rate.
The state gift tax has been repealed (which I supported), effective in 2009. The gift tax made it difficult for small business owners to transfer assets to their families. North Carolina was one of a handful of states that still imposed such a tax.
Taxpayer Protection
The General Assembly changed the process a taxpayer goes through if the taxpayer has a disagreement with the Department of Revenue over the amount of tax due. This legislation will help simplify the appeals process. It also gives taxpayers options for independent review in a non-judicial setting outside of the Department of Revenue.
A provision in this year’s budget gives small businesses some additional protections from tax liability. Among other things, the measure requires the Department of Revenue to document verbal advice given to certain taxpayers and requires the department to waive penalties or additional assessments incurred by relying on that advice. The provision also gives the department increased ability to negotiate compromises. We expect the change to result in an estimated $2.2 million in savings for small businesses.
We also prevented the Department of Revenue from taxing the services of designers and decorators.
Health Insurance
Small businesses that provide health insurance to employees are eligible for a tax credit that both lowers the employers’ costs or providing insurance and increases the number of insured people. Business owners who employ 25 or fewer people and pay at least half the premium costs for their workers are now eligible for a tax credit of up to $300 a year. The total savings for business is estimated at $8.5 million this fiscal year.
Research and Development
A few years ago, tax credit to encourage businesses to perform qualified research and development activities in North Carolina. That tax credit is more generous if the taxpayer is a small business. We have recently increased the amount of this tax credit and set aside $1 million for it in this fiscal year.
Legislators approved a tax credit for people who invest in certain types of small businesses. This tax credit will help small businesses because it will help generate outside capital needed for growth.
Disadvantaged Workers
Legislators enacted a work opportunity credit as an add-on to the federal credit as an incentive to businesses that hire disadvantaged workers. Disadvantaged workers include those who are coming off some sort of public assistance, convicted felons and other groups that find it particularly difficult to find and keep a job. This tax credit is based on a federal tax credit and allows businesses to offset a portion of the wages paid to a qualified employee.
Miscellaneous
My colleagues and I have agreed to a phase out of the sales tax on electricity, the excise tax on piped natural gas and the privilege tax on other fuels used by manufacturers and farmers. Expected savings were $10 million last year and $20 million this year.
Manufacturers pay tax on manufacturing equipment at a reduced rate (1 percent with a cap of $80 per item) compared to the general sales tax rate. Legislators voted to tax software publishers at this reduced rate. This will encourage these companies to bring their businesses and more high-paying quality jobs to North Carolina.
We approved a provision that allows a medical research company to obtain a refund of 50 percent of the sales and use taxes paid on certain types of medical testing supplies. This will make our state more competitive in attracting jobs in health care.
Artisan bakeries (such as Stick Boy Bread Company) are now exempt from sales taxes. An artisan bakery is considered one that gets more than 80 percent of its gross receipts from bakery items and its annual gross receipts do not exceed $1.8 million.
Notes
Congratulations to Joe and Mary Catherine Stanley, Opal Essick and Wilma Krider for winning ribbons at the State Fair.
Congratulations to Ashe County for receiving a $400,000 CDBG grant from the Department of Commerce. The money will be used for Scattered Site Housing Rehab.
Anyone wishing to serve as a Page in the NC House during the 09 session should contact me for an application. The Page program is for high school youth ages 15 to 18 or those currently in the 9th grade. Call me at 828-295-3353 or email at culliet@ncleg.net.
|
