N.C. Rep. Karl Gillespie
In this week’s edition of The Legislative Review, we focus on the Finance Overview and North Carolina’s Reserves and General Fund Availability.
Finance overview, changes
The 2022 Appropriations Act changes several aspects of the State’s tax laws. The most significant modification did not alter the anticipated amount of collected tax revenues, but instead modified their distribution. The Act directs a portion of proceeds generated from net sales and use taxes collected at the general rate of tax (2% in FY 2022-23, 4% in FY 2023-24, and 6% annually thereafter) to be transferred to the Highway Fund and/or the Highway Trust Fund for transportation needs. This change is projected to reduce General Fund revenue by $193.1 million in FY 2022-23, with Highway Fund revenue increasing by the same amount that year.
Other less substantial tax law changes are also made in the 2022 Appropriations Act. The Act expands the personal income tax exclusion of retirement pay to include such benefits earned from service in all uniformed services, thereby providing the exemption to persons that worked for the National Oceanic and Atmospheric Administration (NOAA) and the U.S. Public Health Service (USPHS). The expansion of the exemption is effective for taxable years beginning on or after January 1, 2022, and it is projected to reduce General Fund revenue by $1.6 million in Fiscal Year 2022-23.
In addition, the Act exempts certain purchases of equipment, including conveyor systems, made by interstate air and ground couriers from state sales and use tax. The exemption also applies to related parts and accessories and is effective for purchases made on or after July 1, 2022. This change is projected to reduce General Fund revenue by $6.3 million in Fiscal Year 2022-23.
