Results for Members Await Governor's Signature
State Chamber Scores $311 Million in Savings for Business in General Assembly

You did it! One of the best states in America to do business just got better. With North Carolina ranking high in numerous studies when it comes to business climate, convincing state leaders and lawmakers to take action this year to improve our state's business climate and strengthen our economy was no easy task.

With a rock-solid Competitiveness Agenda built on direct member input and empirical data and an organized business community, our state Chamber was able to deliver results to our customers that amount to hundreds of millions of dollars over the next several years. Further, significant wins in the areas of business taxes, tax administration, legal reform, regulatory environment and health care will bolster North Carolina's leading position among the 50 states in the fierce national and international competition for jobs and commerce.

The close of the 2007 session of the N.C. General Assembly marks several significant legislative victories for North Carolina businesses, which are outlined in this e-newsletter. All that's left is for Governor Easley to sign the bills. Talking to our members and collecting data over the last year revealed numerous opportunities for improvement in key areas that will go a long way in helping our Chamber fulfill its mission to ensure that North Carolina is the best state in America to do business.

As a valued state Chamber member, please provide feedback on our advocacy efforts this year in the General Assembly and this e-newsletter. Click here to email us.  

Customers put Taxes at the Forefront of State Chamber's Advocacy Efforts

Tax policies matter to businesses as they affect location decisions, job creation and retention, and the long-term health of our state's economy. Because pro-growth tax policies are imperative to North Carolina's economic development success, our state Chamber placed tax policy improvements to make North Carolina more competitive at the forefront of our legislative agenda. With the help of numerous pro-business allies and an organized business community, the North Carolina Chamber provided leadership that led to legislative victory on the following tax issues:

NC Tax Appeals Process More Fair and Predictable
Reform of our state's tax appeals process was a top priority for the North Carolina Chamber. The key component of the legislation that passed provides taxpayers, both individual and corporate, the opportunity for an independent hearing outside of the Department of Revenue prior to having to pay taxes in dispute. This much-needed reform has been discussed for years, although the issue recently received new attention in a study where North Carolina ranked at the bottom among 50 states when it comes to tax administration (fairness and predictability).

Our state Chamber, along with "reform coalition" partners including the NC Bankers Association, Bar Association, Biosciences Organization, MCIC, NFIB and Retail Merchants Association, succeeded in getting this legislation passed despite initial opposition from the state Department of Revenue. This victory will go a long way in improving North Carolina's position relative to its peer states in the competition for business investment and jobs.

Energy Tax Exemption Should Save Manufacturers $176 Million Through 2012
The North Carolina Chamber and partner MCIC (Manufacturers and Chemical Industry Council) worked hard this legislative session to ensure that the two-year state budget that passed included money for a phase-out of sales and excise taxes on energy sold to manufacturers. Our state Chamber had to fight even harder to get enabling language passed, however, as it was included in a controversial energy bill that faced fierce opposition and intense media scrutiny.

North Carolina is one of the few states in the southeast that imposes these taxes on manufacturers (Alabama and Georgia are the others). Our state Chamber's Manufacturing Competitiveness Poll, Manufacturing Summit and various studies pointed to this issue as a significant opportunity to improve our state's competitiveness to help North Carolina attract, retain and grow more of these good jobs. (Manufacturing jobs pay, on average, 25 percent more than non-manufacturing jobs.)

According to a legislative fiscal note, the Chamber-backed energy tax exemption will save NC manufacturers roughly $176 million over the next five years. Strong support from the business community, economic developers and other pro-growth, pro-jobs organizations turned this important competitiveness objective into reality this year.

The energy bill that contained the language to make this important state Chamber priority a reality came under fire from environmental groups such as NC WARN, which ran full-page ads in The News & Observer to try and defeat the bill. Additionally, some liberal groups, the conservative John Locke Foundation, and several media outlets publicly opposed the bill. In the end, our state Chamber and NC manufacturers prevailed.

State Chamber Fought for Reduction in 'Small Business Tax'
The North Carolina Chamber worked with lawmakers to deliver a scheduled 0.25 percent reduction in the top marginal personal income tax (PIT) rate this legislative session. Our members told us at "listening meetings" and in our annual CEO poll that taxes (non-competitive rates, in particular) are a top-of-mind concern for North Carolina business so we made the scheduled reduction in our state's top PIT rate a priority.

The quarter-percent reduction in North Carolina's top PIT rate (effective with the 2008 tax year) will save small business taxpayers and others $40.8 million during 2007-08 and $93.7 million during 2008-09. Our state Chamber encountered not just the anticipated opposition to lowering the top marginal PIT rate (coalitions of liberal groups and unions), but also had to work hard to combat the media's ongoing representation of this pro-growth tax policy change as nothing more than a "tax cut for the rich." Despite the widely publicized opposition, our Chamber is pleased that lawmakers made the wise decision to invest in small business job creation by allowing this "small business tax" to roll down as it was set to do.

At 8 percent before the reduction, North Carolina had one of the highest top PIT rates in the country. This high PIT rate was especially onerous for small businesses because they pay personal income taxes rather than corporate. Small businesses represent the backbone of our state's economy (75 percent have 10 employees or less, 93 percent have fewer than 100). Changes in PIT rates, therefore, can have a widespread impact on the investment capacity, productivity and profitability of small businesses and thus our state's economy. Since the vast majority of new jobs come from small businesses already operating in our state, any reduction in small business tax rates means additional jobs, which is good for all North Carolinians.

North Carolina's high PIT rate was not only a heavy burden on many small businesses, but also made the state less attractive to high-wage professionals, such as engineers, which hampered many of our companies' ability to recruit talent. Additionally, economists attest that lower, more competitive PIT rates help our state secure the economic activity of relatively high-income individuals who are mobile and look at these tax rates when deciding where to locate or relocate. Having these individuals locate in North Carolina secures their property and sales tax revenue, in addition to the income taxes they pay.

State Chamber Saves Major NC Employers $215 Million, but the Fight Goes On
The North Carolina Chamber and it pro-business, pro-jobs allies prevented passage of legislation this session which would have forced major North Carolina companies to file a combined income tax report and potentially pay state taxes on income not attributable to North Carolina. If this legislation had passed it would have unfairly cast a net over all multi-state corporations based on the unfair and inaccurate assumption that none are paying as much tax to the state as they should be. Further, the proposal would not have added to the Secretary of Revenue's ability to pursue those who may be engaged in tax evasion. In addition, this proposal would have placed North Carolina behind the curve on state tax policy, as only 18 states require unitary combined reporting and none of North Carolina's neighboring states nor any states in the Southeast require it.

The state Department of Revenue had estimated an additional $215 million in tax collections from corporations if this measure passed. Our state Chamber, along with a number of business allies, worked diligently to keep this legislation from passing this year. The proposal, which was included in the governor's proposed budget, was supported by the Department of Revenue, unions and other anti-growth groups.

The fight against this anti-business, anti-jobs proposal will likely continue next year. The issue is likely to be discussed in both the Fiscal Modernization Study Committee and the Revenue Laws Study Committee. North Carolina employers can rest assured, however, that their state Chamber will be ready to go to battle for business and jobs again - and again.

State Chamber Fought Off Efforts to Increase Lawsuits

The frequency and high cost of litigation is a matter of growing concern for businesses of all sizes. Our members and research told our state Chamber that part of rising business costs in North Carolina involves increasing legal costs. Acting on our customers' concerns, our Chamber worked hard this year to prevent measures that would have increased legal costs for businesses and likely led to more lawsuits:

Chamber Defeats Effort to Extend Time Allowed for Products Liability Suits
The North Carolina Chamber vigorously fought legislation that would have more than doubled the amount of time during which products liability claims can be brought against manufacturers, as well as distributors and everyone else along the product chain from manufacturer to consumer. The bill, if passed, would have changed North Carolina's statute of repose law from 6 to 15 years. Our state Chamber understood the devastating effect that this legislation would have had on our state's manufacturers and we are happy to report that we successfully defeated this effort.

If this statute of repose bill had passed, North Carolina would have become one of only three states with the longest period for filing product liability claims. Such a dramatic and unnecessary change would not only deter businesses from staying here, but would also serve as a disincentive for new businesses in deciding whether to locate in our state. With reasonable limits on liability, NC manufacturers are able to invest money in research and development to produce superior products instead of spending resources on additional lawsuit defense and insurance.

With litigation costs already on the rise, this increase in exposure would place more pressure on businesses already struggling to keep costs down. Because the costs of defending lawsuits is so great in terms of legal fees, loss of employee time and productivity, etc., this bill would have created a powerful incentive for companies to settle even frivolous cases. Further, data indicates that increasing legal costs fall disproportionately on small businesses. Our state Chamber worked with local chamber partners and like-minded business organizations to defeat this harmful proposal, which was a top priority of the trial lawyers.

Chamber Develops Compromise on Civil Jury Selection Bill
The North Carolina Chamber led a coalition in opposing a bill that would have given an advantage to trial lawyers in jury selection in civil trials. A state Chamber-led coalition opposed a bill that would have guaranteed plaintiffs the same total number of peremptory (challenges without cause) juror challenges as defendants in cases where there were multiple defendants.

The proposed bill would have given an unfair advantage to plaintiffs because it would negate a finding by the court that the multiple defendants had antagonistic interests. The proposal also would have lengthened the time it takes to select juries leading to longer trials and increased costs to the judicial system.

The North Carolina Chamber-led coalition, which included the Association of Defense Attorneys, Carolinas AGC, the Hospital Association, the American Insurance Association and others, developed a compromise that leaves the decision on jury challenges in these types of cases to the discretion of the judge.

Chamber Fought to Eliminate Excessive Industrial Machinery Regulations

A coalition of more than 40 businesses, local chambers and allied business organizations joined our state Chamber in advancing an industrial machinery bill this legislative session which established that industrial machinery is not subject to regulation under the building code. North Carolina was one of the few states that had mandated a machinery listing and labeling requirement through the building code process. The safety of industrial machinery is properly and effectively by NC-OSHA. Therefore, regulation under the building code is excessive and costly for NC businesses.

The legislation that passed lowers business costs for companies already operating in North Carolina, and makes the state more attractive to companies seeking to locate here. Prior to the passage of this bill, North Carolina was at a competitive disadvantage because it was one of the few states burdened by this double regulation. This change makes it easier for companies to invest in new machinery and equipment to step up productivity. Upon passage of this state Chamber priority legislation, Don Hobart, general counsel for the state Department of Commerce stated: "This is one of the top three most impressive economic development victories in the past 10 years."

The business community really rallied around this competitiveness initiative, along with economic developers and pro-business organizations. Our state Chamber lobbyists were joined by many of our local Chamber partners - particularly the Charlotte, Raleigh, Gaston County and Asheville chambers - as well as the NC Economic Developers Association and MCIC in working to remove this burdensome unnecessary regulation. Our coalition succeeded in fighting off those in opposition, which initially included the state Insurance Commissioner.

High-Risk Insurance Pool Costs to be State-Funded
State Chamber Works for Business to Control Rising Healthcare Costs

Members told our state Chamber loud and clear that healthcare costs were among their top two economic concerns. Therefore, when a high-risk insurance pool was created this session to provide insurance to the "uninsurable" with pre-existing medical conditions, the North Carolina Chamber supported efforts to make sure that whatever funding mechanism or stream was identified did not drive up healthcare costs for business.

One version of the high-risk pool proposal assessed fees per insured consumers to accumulate money to cover the uninsured. (Initial costs were 70 cents for each insured person and would rise to $2 per insured person by 2013.) Our state Chamber was opposed to this proposal and argued for alternative funding.

Ultimately, our state Chamber and business allies in the healthcare industry worked to find a way to fund a high-risk insurance pool without raising healthcare costs for business. The version of the bill that passed establishes that the pool will be state-funded as opposed to the proposed assessment on insured consumers.

Finding a way to insure North Carolinians who cannot obtain coverage because of they are "high-risk" should save all healthcare consumers money - businesses and individuals alike. A high-risk insurance pool should reduce the amount of uncompensated care supplied by hospitals and other providers that drive up premiums for everybody.

Coming up from the State Chamber . . .

The North Carolina Chamber will let its members know when the governor has signed the bills that will turn the legislative victories outlined in this newsletter into competitive advantages for our great state. While these are important pro-growth, pro-jobs victories for North Carolina businesses and residents, our Chamber will continue over the months ahead to identify additional opportunities to strengthen our business climate and economic development efforts.

Look for future issues of The Business Advocate for reports on legislative victories in education and economic development. In order for any state to be the best in America to do business, it must excel in all three pillars of a sound and growing economy, which mirror our state Chamber's priority areas: 1) Business Climate 2) Education and 3) Economic Development.