Taxes, tax credits debated among legislature
Published 8:32 am Thursday, April 2, 2015
By Julia C. Howard
NC House of Representatives
The Senate unveiled a new sales tax distribution proposal, which would shift sales tax revenues away from municipalities like Raleigh, Charlotte, and Durham and towards rural populations and counties.The House passed a bill that would reinstate the Historic Preservation Tax Credit. Finally, both chambers revealed their compromise plan on future gas and diesel taxes, which is set for a vote.
• The tax credit for expenses related to rehabilitating historic properties expired on Jan. 1, after the House and Senate allowed it to expire as part of the larger tax reform that the House and Senate began in 2013. The credit was used to revitalize downtown properties, such as main street building facades, and develop larger historic properties into income-generating commercial districts, like the tobacco campus in Durham. However, the credit was criticized for its use by private homeowners for simple home renovations and its concentration in wealthy, tier three counties.
The new proposal reinstates the tax credit as the Historic Rehabilitation Tax Credits Investment Program, which can be claimed for a lower rate than the previous credit, imposes a cap, and increases the amount that can be claimed by tier 1 and 2 projects. Similar to the previous credit, there are lower rates for non-income generating properties. The new credit is set to expire in 2021. The Mill Rehabilitation Tax Credit was not included in this extension. Projects are no longer able to apply for that credit and all eligible projects will no longer receive the credit for expenditures after Jan. 1, 2023.
This bill passed the House on Thursday and has been received by the Senate.
• Over the interim, the Revenue Laws Study Committee, which I chaired, was ordered to study the collection of taxes by rental intermediary companies such as Air B&B. These companies allow homeowners to rent rooms in their house for a short period of time through their system. Air B&B is part of what economists have named “the sharing economy,” which empowers non-commercial entities to collect fees for simple services. Another example of a sharing economy system are ride share programs like Uber and Lyft, which allow car owners to provide rides to Uber and Lyft users for a fee, similar to a taxi service. Since this economy is relatively new, it’s highly unregulated, and these young companies are sometimes able to avoid lawful taxes and insurance requirements that apply to their trade.
It is important to encourage innovation and allow new business to thrive. Uber drivers and Air B&B renters are able to supplement their income and provide for their families through these new systems. Still, taxes should be collected when lawfully applicable. This week I filed HB 379 which would clarify that Occupancy and Sales taxes should apply to rentals provided through Air B&B. Occupancy taxes apply to short-term rentals and are used exclusively for county and municipality tourism-related expenses. This tax is already collected by commercial entities like hotels and bed and breakfasts, and would apply to homeowners as well. Sales taxes apply to middle-men services provided through companies like Hotels.com, which serve an equivalent function with Air B&B.
This bill doesn’t impose or increase any tax or fee, it simply clarifies that these new companies are liable to collect taxes that already apply to their industry. It ensures that the short-term rental market is fair and free from harmful and unequal taxation.
• I wanted to take a brief moment to notify you of upcoming construction work on Joe Road. I received multiple complaints about the road’s poor conditions and wanted to take time to report that DOT has included Joe Road in its April award of the 2015 Chip Seal contract. The road will be patched by DOT workers and then sealed by a contractor with a completion date of October.
Should you have any concerns, do not hesitate to contact me.
Legislative Office: 919-733-5904; Mocksville: 751-8567; Julia.Howard@ncleg.net.