For Members Only is published monthly when the General Assembly is not in session


Index of major stories in this issue: Republicans make inroads in Council of State... Senate Finance leader sympathetic to tax cut... NCCBI's top lobbyists takes new position... Amendment One to spur job growth... Fed official to address Economic Forecast Forum... List of new NCCBI members... Triad governments competing for Dell... Analysis of the new R&D tax credit... New law on workplace violence takes effect.... Changes in Qualified Business Venture tax credit... Guidelines on use of project development financing bonds...  

Bucking national trend, Democrats
gain power in the General Assembly
Voters sent more Republicans to Washington and more Democrats to Raleigh in last month’s elections, a development that probably has greater implications for the General Assembly than Congress.

The big change will be in the state House, which swung back into a Democratic majority at 63-57. Democrats gained five seats, ousting Republican incumbents in four races and winning one open seat. That probably portends an end to the bipartisan leadership of Democrat Jim Black and Republican Richard Morgan as co-speakers.

The decision officially rests with the House Democratic Caucus, which will meet soon after the General Assembly reconvenes for on Wednesday, Jan. 26. Senate leader Marc Basnight, the longest-serving speaker pro tem in state history, will have a more comfortable majority at 29-21, a pick up of two seats for the Democrats. Everyone expects he will remain pro tem.
 
Notable results of the legislative elections:

Democrat John Snow, a former District Court judge from Murphy, beat eight-term Sen. Robert Carpenter (R-Macon) by 284 votes, a result confirmed after a recount in the eight-county 50th Senate District.

New Hanover County Commissioner Julia White, a Democrat, will become the first openly gay member of the Senate after her defeat of Sen. Woody White (R-New Hanover). White was appointed to the Senate to fill out the term of Patrick Ballantine after he resigned to run for governor.

In the Sixth District of Jones and Onslow counties, incumbent Sen. Cecil Hargett (D-Onslow) was beaten by Republican Harry Brown.

 In the mountainous 47^th District, incumbent Democrat Sen. Joe Sam Queen was beaten by Republican Keith Presnell.

 In the 34^th House District in Wake County, incumbent Republican Rep. Don Munford was beaten by Democrat Grier Martin.

In the 39^th House District in Wake County, incumbent Republican Sam Ellis was beaten by Democrat Linda Coleman.

In the 57^th House District in Guilford County, incumbent Republican Joanne Bowie was beaten by Democrat Pricey Harrison.

In the race between two incumbents thrown into the redrawn 65^th House District in Rockingham County, Democrat Nelson Cole beat Republican Wayne Sexton.

 In all, there will be 12 new members of the Senate – six Democrats and six Republicans. There will be 21 new members of the House – 10 Democrats and 11 Republicans. The vast majority of those are coming from open seats created by redistricting. See charts of all members of the House and Senate.
 
Democrats will meet to vote on leadership posts later this month, but the Republican leadership already is known, in the Senate at least. Sen. Phil Berger (R-Rockingham) will serve as Senate Minority Leader, the job held by Sen. Jim Forrester (R-Gaston) since Patrick Ballantine resigned last April. Sen. Tom Apodaca (R-Henderson) was re-elected Deputy Minority Leader at the party caucus. Forrester was chosen chairman of the GOP House and Senate Joint Caucus.

Several House Republicans are said to be interested in the party leader post now held by Rep. Joe Kiser (R-Lincoln), but he has said he believes the caucus will keep him in the post.

Voter turnout on Nov. 2 was 61.9 percent, the best since 1992.




Republicans make inroads in Council of State
See charts of result of statewide and federal elections
Republicans picked up at least one and possibly three seats on the Council of State. Les Merritt, a Zebulon accountant, narrowly defeated three-term Democratic incumbent Ralph Campbell for state Auditor. It’s possible the GOP will pick up two other Council of State seats, depending on the outcome of a dispute over 4, 530 lost ballots in Carteret County. That number is more than the slim difference between the candidates for Agriculture Commissioner and State Superintendent of Public Instruction. Until now, Labor Commissioner Cherie Berry was the only Republican on the Council of State.

The lead has seesawed between Democratic incumbent Britt Cobb and Republican Steve Troxler for Agriculture Commissioner. Cobb was appointed to the post when Meg Scott Phipps resigned last year. In the open contest for superintendent of public instruction, Republican Bill Fletcher of Cary, a Wake County school board member, maintained a narrow but not decisive lead over Democrat June Atkinson, a retired official at the Department of Public Instruction. In a Nov. 30 meeting, the State Board of Elections declared Atkinson the winner. However, Fletcher refused to concede.

In Carteret County, a voting machine error wiped out 4,520 ballots cast during the early-voting period. Legislative leaders created a new study commission to examine electronic voting machines with the goal of ensuring that all votes cast in future elections are counted properly.

Because of the lost votes in Carteret County, the elections board voted 4-1 to allow all registered voters in Carteret County, including those who didn't vote in the general election, to have another change in the voting booth. No date was set for this second election, but it probably won’t be before mid-January. Also undecided was one District Court judgeship and the House seat now held by state Rep. John D. Hall (D-Halifax) because he had not filed required campaign finance reports.

In other election news, Gaston County voters rejected a half-cent sales tax increase to be used by local governments to pay for infrastructure and tourism-related projects. The legislature had agreed to put the measure on the ballot at the request of several local groups.

All but one local or county bond issue on the ballot around the state passed, as indicated on the chart below:

Senate Finance leader sympathetic to tax cut
The co-chair of the Senate Finance Committee said in an address at a recent NCFREE meeting that the Senate definitely would consider cutting the state’s corporate income tax rate. Sen. David Hoyle (D-Gaston) said state revenues are running $70 million ahead of projections through Oct. 31, and that the state could finish the fiscal year with a surplus of $200 million to $300 million. But Hoyle (right) noted that the scheduled expiration of two the half-cent supplemental sales tax and an upper-income bracket in the state income tax will reduce revenues next year by $525 million. Hoyle promised a sympathetic hearing for NCCBI’s efforts to reduce the state's corporate income tax, which raises about $800 million a year. Cutting the tax rate from 6.9 percent to below 6 percent. The chart on the next page shows where the state budget stood at the end of September.

NCCBI News
Bevacqua Coman, NCCBI’s top lobbyist, accepts new position
Leslie Bevacqua Coman (left), NCCBI’s vice president of governmental affairs for the past eight years, has resigned to join the public affairs staff of Capstrat, a strategic communications firm based in Raleigh. She will assume the new post the first of the year. Earlier, Julie Woodson, NCCBI’s director of governmental affairs who worked directly under Bevacqua Coman, also resigned to accept another lobbyist position, and a replacement has been hired. See story below.

Coman is ranked sixth in the Center for Public Policy Research’s listing of the 50 most effective lobbyists and is the highest-ranked female lobbyist in the state’s history.

“I am thrilled to announce Leslie’s arrival at Capstrat,” said Ken Eudy, Capstrat CEO.  “She brings a deep knowledge of North Carolina government and business, and is one of the most well-regarded leaders in this state.  She has built her career and reputation on a solid work ethic that will benefit our clients.”

"Capstrat's gain is certainly NCCBI's loss,” said NCCBI President Phil Kirk.  “Leslie has not only been one of the state's most effective lobbyists, she has contributed to the improvement of the business climate in North Carolina in so many ways.”

Bevacqua Coman chaired the steering committee of North Carolinians for Jobs and Progress, which led this year’s successful Amendment One campaign.  In 2000, she served as campaign director for North Carolinians for Educational Opportunity, the committee that successfully promoted the $3.1 billion bond higher education bond issue, the largest statewide bond referendum campaign for higher education in U.S. history.  Capstrat served as general consultant on both campaigns.

“She has been at NCCBI during a time of growth and progress for our organization and she has been a prime contributor as a member of our team,” Kirk added. “In addition, Leslie is an individual with strong convictions, strong work ethic, and she is very loyal to her friends and to NCCBI. We wish her well.

Earlier in her career, Coman was head of government relations for a Triangle law firm.  She also served on Gov. Jim Hunt’s staff as Appointments Aide for State Boards and Commissions, where she worked with Hunt in making appointments to more than 400 state boards and commissions. Coman has lobbied the N.C. General Assembly for 20 years.

“I’ve really enjoyed my years at NCCBI and the great friends I’ve made through my work here,” Bevacqua Coman said. “The position with Capstrat offers me a new career opportunity which I’m excited about. Even though I’m leaving, I look forward to continuing a strong relationship with the staff and volunteers at NCCBI.”

Amendment One to spur job growth
With last month’s passage of Amendment One, economic developers and local elected officials are looking forward to using a new tool to help them create jobs. Before voters approved the constitutional amendment by a 51 to 49 percent margin, North Carolina was one of only two states that didn’t give local governments the option of issuing project development bonds to finance infrastructure improvements.

During an election season when Republicans and Democrats were sharply divided on many issues, Amendment One was one of a few they united in supporting. “The people have indeed spoken. Tonight’s victory shows how ready North Carolinians are to revive their state and create jobs that will help improve their lives,” said NCCBI’s Leslie Bevacqua Coman, who served as steering committee chair for North Carolinians for Jobs and Progress, the umbrella group that promoted the bonds. “As we have been saying all along, Amendment One will help communities across North Carolina return to prosperity. Above all else, North Carolinians understood the importance of Amendment One and voted to give their local communities a tool that can only help to strengthen our economy and our state.”

It was the third time in recent years that NCCBI staff and volunteers from our membership provided the leadership for a statewide effort. NCCBI provided the leadership for the 2000 campaign for $3.1 billion in bonds for the UNC System and the community colleges and the 1996 bond campaign for $2.75 billion for K-12 school construction and highways. It also was the third time that project development financing had been on the ballot; it was defeated in the 1980s and ‘90s.

“Anything less than a total commitment and 100 percent effort would have resulted in a third-time loss on getting this amendment to our state constitution passed,” NCCBI President Phil Kirk said. “This is another example of what NCCBI is all about -- promoting economic growth in order to create good jobs for our citizens and a better quality of life. Thanks to each of you who helped to make this wonderful victory a reality.”

Kirk also praised NCCBI Chair Barry Eveland, who served as one of the campaign co-chairs and made many speeches on behalf of Amendment One; NCCBI Second Vice Chair Graham Denton, who was the finance committee chair for the campaign; and the many other NCCBI members who made speeches, wrote letters, gave money, and promoted the passage with their employees and friends. Former governors Jim Hunt, Jim Holshouser and Jim Martin served as honorary co-chairs of the campaign.

Officials said Amendment One bonds most often will be used to redevelop abandoned factories and plants into small business centers, build new manufacturing plants and affordable housing, spur community revitalization, build business incubators and commercial development and clean up environmentally damaged areas.

North Carolinians for Jobs and Progress, the coalition behind Amendment One, included representatives from NCCBI, the N.C. Economic Developers Association, the N.C. Association of County Commissioners, N.C. League of Municipalities, N.C. Metropolitan Coalition, local chambers of commerce and the North Carolina Rural Center. More than 400 civic groups endorsed the bonds. The Local Government Commission has issued a brief outline of how the process associated with project development financing will work. See story


Federal Reserve official to address Economic Forecast Forum
The new president of the Federal Reserve Bank of Richmond, Jeffrey M. Lacker (right), will be the keynote speaker at the third annual Economic Forecast Forum on Monday, Jan. 3. The event, co-sponsored by NCCBI and the N.C. Bankers Association, will be held at the Sheraton Imperial Hotel in Research Triangle Park beginning at noon. Held on the first business day of each New Year, the forum provides insightful briefings to business leaders on key trends in finance, interest rates and credit availability.

Dr. Harry M. Davis, the noted professor of finance at Appalachian State University and chief economist at the Bankers Association, also will address the gathering and deliver several predictions on economic trends for the year ahead. Other speakers will be announced later.

Last year’s luncheon event drew roughly 700 people and an even larger crowd is expected this year. Prices for individual tickets are $50 or $500 for a reserved table. Sponsorship opportunities also are available. Interested persons should contact Rosemary Wyche at 919-836-1413. Watch your email for registration and ticket ordering information.

Lacker, 48, was promoted to president of the Richmond Fed on Aug. 1 upon the retirement of J. Alfred Broaddus Jr. after 34 years with the bank. Lacker has been with the bank since 1989, most recently as senior vice president and director of research. A native of Kentucky, he received a bachelor’s degree in economics in 1977 from Franklin and Marshall College. He then joined Wharton Econometrics in Philadelphia and went on to earn a Ph.D. in economics in 1984 from the University of Wisconsin. Lacker was an assistant professor of economics at Purdue University for five years before joining the Richmond Fed.

Lacker is only the seventh person to lead the Richmond Fed in its 90-year history. The Federal Reserve Bank of Richmond is one of 12 District Reserve Banks that together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Richmond Fed serves the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. A nine-member board of directors governs the Richmond Fed. North Carolina has two members of the board, Ernest J. Sewell of Greensboro, president and CEO of FNB Southeast; and Theresa M. Stone of Greensboro, CFO of Jefferson-Pilot Corp. and president of Jefferson-Pilot Communications Co.

NCCBI wishes to recognize the member companies who are sponsoring the Economic Forecast Forum. Platinum Sponsors: RBC Centura Bank. Gold Sponsors: Bank of America, Blue Cross and Blue Shield of North Carolina, Crescent State Bank, Gateway Bank & Trust, GlaxoSmithKline

North Carolina’s Northeast Partnership, U.S. Trust, Wachovia Bank. Silver Sponsors: LSB The Bank, Kilpatrick Stockton LLP, Management Assistance: Programs & Services (MAPS), Ogletree Deakins Nash Smoak & Stewart, Piedmont Natural Gas, Progress Energy


Former NCCBI Chair Dies: W. Roger Soles, the Greensboro business and civic leader who chaired NCCBI in 1980-81, died Oct. 20. He was 84. Soles retired as chairman and CEO of Jefferson-Pilot Corp. in 1993 after a life-long career with the company. Following service as a combat navigator in World War II, Soles finished his degree at UNC Chapel Hill in 1947 and joined a new securities department at Jefferson Standard Life. He rose through the ranks in his 46 years with the company, and achieved the top position when Jefferson merged with Pilot Life in 1986. Soles was active in charitable and civic activities in the Triad and statewide. He is survived by two children and two grandchildren

Please welcome these new members
Companies that joined or rejoined NCCBI in October, along with the name of the key executive at each company, include:
American Asset Corp., Paul Herndon, Charlotte
Asset Management Advisors, J.C. Blucher Ehringhaus, Charlotte
Avery Healthcare System, Edward C. Greene, Linville
Bill Black Chevrolet Cadillac, William H. Black, Greensboro
Blue Ridge Companies Inc., Christopher Dunbar, High Point
Brentwood Services Inc, Christine Novak, Charlotte
Burlington Insurance Co. Inc., Kerry Fabor, Burlington
Carolina Ice Co., Tommy Edwards, Kinston
Carteret County Public Schools, Dr. David Lenker, Beaufort
Coastal Finance Co., Edward Renfrow, Morehead City
Collett & Associates, Charles Ellis, Charlotte
Comfort Homes Inc., Julian Stewart, Clayton
Durham Marriott, Ken Lile, Durham
ELI Research Inc., Greg Lindberg, Durham
Flow Imports Inc, DBA Flow Lexus, Paul Hummel, Kernersville
Graphica, Dina Dunn, Greensboro
Grubb Properties Inc., Clay Grubb , Charlotte 
HCS Systems, Ray Honeycutt, Garner
Horack Talley Pharr & Lowndes P.A., Ms. Donna Smith, Charlotte
Institute for Emerging Issues, Luke Bierman, Raleigh
Iredell-Statesville Schools, Dr. Terry K. Holliday, Statesville
Lord Corp., David Siporin, Cary
Lutheran Retirement Ministries Inc., Chan Chandler, Burlington
McGuire Woods, John C. Fennebresque, Charlotte
McNair & McNair, J. Frank McNair, Winston-Salem
MCO Transport Inc., Hon. Daniel F. McComas, Wilmington
Mid Eastern Athletic Conference, Dennis Thomas, Greensboro
Mulvaney Group Ltd., Mick Mulvaney, Charlotte
N.C. Shakespeare Festival, Pedro Silva, High Point
Nationwide Insurance, Ted Seagroves, Chapel Hill
Norton & Associates, Robert H. Norton, Elizabeth City
Office of J. Phil Coyle , J. Phil Coyle , Gastonia
Office of Robert W. Mitchell, Robert W. Mitchell, Wilmington
Peanut Processors Inc., Rhee Sutton, Dublin
Phoenix Associates, Luther H. Hodges, Chapel Hill
Progressive Development, Steve Goodman, Charlotte
Quintiles Transnational Corp., Dr. Dennis Gillings, RTP
Randolph Electric Membership Corp., Dale F. Lambert, Asheboro
S.B. Coleman Construction Co., Stewart B. Coleman, Asheville
Sandhills Place To Place Inc., Marshall Joyner, Southern Pines 
Scott Insurance, Bret Grieves, Greensboro
Smith Rental Inc., Rodney Smith, Burlington
The Cato Corp., John P. D. Cato, Charlotte
The Watkins Group LLC, Robert S. Whitener , Cornelius
TIC of Apex, Nader Shahin, Apex
Triple T Parts & Equipment Co., Jeff Battle, Wilmington
Windsor Athens LLC, James deS. Shaffner , Charlotte
Zenith Freight Lines LLC, Jack Hawn Jr., Conover.


Dalton joins association staff as director of government affairs
Elizabeth L. Dalton joined NCCBI as director of governmental affairs in November, replacing Julie Woodson, who held the position for more than five years. Woodson joined the N.C. Pork Council as director of public affairs, where she will be responsible for media and membership affairs and lobbying efforts.

NCCBI President Phil Kirk said, “Julie has done an outstanding job in so many areas at NCCBI -- lobbying, staffing support for many of our policy committees and the Young Executives Forum, marketing and organizing the NCCBI Expo at the annual meeting, and much more. She has done it with enthusiasm, a positive attitude, and a strong work ethic.  She will be missed here and we wish her well in her new position of responsibility.”

Kirk noted, “The loss of Julie has been lessened by the hiring of Elizabeth, who has many of the same attributes which Julie brought here. I have known and worked with her for several years and am confident that she will be an effective advocate for the business community in a variety of ways here at NCCBI.”

Elizabeth earned a BA in public policy analysis and political science from UNC Chapel Hill in 2002. An impressive scholar, she was a Morehead finalist and American Academy of Achievement Scholar and a Paderewski Medal recipient in 1998. In 1996 Dalton was a Project Harmony Cultural Exchange student to Ivanovo, Russia.

Dalton comes to NCCBI from Bone and Associates in Raleigh, where she served as a lobbyist. At UNC she interned with the Office of Government Relations, where she researched legislation affecting the university and assisted with office management. Dalton also interned with state Senate President Pro Tem Marc Basnight, where she responded to constituent concerns and researched legislation. While at UNC, Dalton served as president of the shag dance club and volunteered in the schools’ dance marathon and was an officer in the Alpha Chi Omega Sorority among other activities.

Kirk addresses Economic Development Board
"These are exciting times for economic development in North Carolina with the successful passage of Amendment One and the announcements of new jobs for the state," NCCBI President Phil Kirk told members of the N.C. Economic Development Board at its quarterly meeting in High Point on Nov. 10.

Chairman Robert Stolz called on Kirk to discuss the Amendment One campaign that was conducted under the auspices of North Carolinians for Jobs and Progress. The steering committee was chaired by Leslie Bevacqua Coman, NCCBI's vice president of governmental affairs. Passage of the amendment, which will allow for the issuance of self-financing bonds by local governments, was considered a surprise to many observers, especially because it had met overwhelming defeats in two previous attempts.

"Thanks to the business community for its financial contributions which enabled us to get the facts out on this jobs-creation issue," Kirk said. "We also appreciated your efforts at educating your employees, friends, and neighbors."

He also pointed out there were 38 bond issues on the November ballot and that 37 passed.  "That is a tremendous testimony to the positive feelings about the future of our state and indicates a trust in local and state governments."


Names in the News
Holshouser honored with University Award
Former governor James E. Holshouser, a long-serving member of the UNC Board of Governors, was presented the prestigious University Award on Nov. 11 in an impressive ceremony at the George Watts Hill Alumni Center on the UNC-Chapel Hill campus. The award is the highest given by the University of North Carolina. NCCBI President Phil Kirk presented the award.  He served as Holshouser’s chief of staff in 1973-75 and as his secretary of the Department of Human Resources in 1976.

Kirk said, “The general election campaign was hotly contested. Governor Holshouser was heavily outspent but he and Pat Holshouser were not outworked. Also it didn’t hurt their chances when President Nixon carried North Carolina by 70 percent – a landslide of great proportions.

Kirk added, “Governor Holshouser is remembered for progress and change in many areas. His administration brought a new era of professionalism into the Department of Transportation. The public school kindergarten program, begun by Governor Scott, was expanded statewide into every elementary school.  Community colleges received historic expansion funds and higher education was also looked upon favorably.  The long-neglected state parks system received it largest expansion in history.  The number of women and minorities appointed to positions of authority and influence set state records. An historic Coastal Area Management Act was proposed by the Governor – and its successful passage brought environmental controls to our beautiful coast. He brought 75 business executives to the state Capitol to study the operations of state government. Hundreds of thousands of dollars – in fact millions of dollars – of savings were implemented.”

Kirk used the adjectives “honest, caring, intelligent, loyal, persuasive, and articulate” in describing Holshouser.

President Molly Corbett Broad also spoke: “This university has no greater friend or better role model than James E. Holshouser Jr., a proud product of this great University who has used his extraordinary leadership abilities, great wisdom, and quiet powers of persuasion to bring about lasting improvements in public education at all levels in this state,” Broad said.  “As a legislator, governor, and during a quarter-century of volunteer service on the Board of Governors, he has always taught – and led – by example, personifying the true meaning of servant leadership. Through his life and his long service, Jim Holshouser eloquently reminds us of the timeless value of caring and ethical behavior; of the importance of collaboration and community; and of the power of education to change lives for the better.  In these characteristics he and his wife, Pat, are one!”

“You have urged and then gently prodded us to imagine a better future for all North Carolina’s people, and then have helped us work together – across political parties, geographic borders, and differing ideologies – to transfer those dreams into reality, “ Broad said.  “You honor us tonight with your presence and with your ongoing service.” J. Craig Souza, chairman of the Committee on the University Award, and J. Bradley Wilson, chairman of the UNC Board of Governors, also spoke.

 

Economic Development
Triad governments competing for Dell computer plant
Everyone is waiting for the other shoe to drop in the Dell Inc. computer plant deal. Local governments in the Triad are assembling competing incentive packages in hopes that Dell will choose their areas as the site for its $100 million manufacturing facility and its 1,500 jobs. The state approved $242.5 million in tax credits and incentives for Dell – the largest incentives package in state history – and local incentives would push the total even higher.

Greensboro and Guilford County are offering a joint incentives package worth $12.4 million.  Other Triad governments said to be assembling packages are High Point, Forsyth County, and Winston-Salem. Forsyth County is offering $14.76 million in incentives, to which Winston-Salem would add another $13 million for a total package of about $28 million.

The computer maker said it definitely would locate the 400,000-square-foot plant somewhere in the Triad. Total employment at the facility, including suppliers, is estimated to be about 2,000. The project is expected to have a $24.5 billion impact on the state economy over 20 years and bring in an estimated $743 million in net revenue. A cost-benefit analysis run by the N.C. Department of Commerce indicates that the plant will generate an additional 6,000 (multiplier) jobs in the region.
 
The General Assembly convened a one-day special session on Nov. 4 to approve the economic incentive package for Dell. Legislators approved the package by a vote of 92-18 in the House and 33-15 in the Senate. Ninety-five percent of the Dell incentives will be in rebates on corporate income taxes and franchise and sales taxes.

In addition to the Computer Manufacturing Tax Credit, Dell will receive a Job Development Incentive Grant (JDIG) valued at up to $14.1 million over 12 years. For each year in which the company meets the required performance targets, the state will provide a grant equal to 75 percent of the state personal income withholding taxes derived from the creation of new jobs. Because Dell will locate in a Tier 4 or 5 county, nearly $4.7 million will go to the state’s Industrial Development Fund for infrastructure improvements in rural North Carolina.

Dell also will receive training assistance from the New and Expanding Industry Training program, Golden LEAF Foundation and the Piedmont Triad Workforce Development Boards. Funding provided by the workforce boards is contingent upon the company hiring displaced and adult workers. The estimated total cost of all the incentives is $242.5 million over 20 years based on Dell’s current plan.

 McGrann Paper Corp. said it would relocate its headquarters and distribution center from Watertown, N.Y., to Charlotte, creating 40 jobs and $1.6 million in investment. McGrann Paper will lease a 140,000-square-foot building and plans to be operational by the end of the year. The average pay for the 40 new jobs will be $49,000 annually. Half of the jobs will be administrative jobs in the new headquarters, while the other half will be manufacturing/warehousing positions. The move was made possible in part by a $40,000 grant from the One North Carolina Fund.




Note to readers: With the approach of the new year, we thought it would be useful to provide you with information about impending changes in state laws that may impact your business or your investments. The stories below, written by experts in the field, address those issues.



North Carolina expands R&D tax credits
By Jack Harper, Harper, Wiggins & Co., Raleigh
Under the current William S. Lee Tax Credits provisions, only taxpayers in certain eligible industries outlined in Article 3A, Chapter 105 of the North Carolina Revenue Statutes are entitled to claim tax credits for research and development (“R&D”) expenditures. Those eligible taxpayers can elect to calculate their research and development tax credits using one of two alternative methods, (1) a credit of 5 percent of the increase in R&D expenses apportioned to North Carolina, or (2) a credit of 25 percent of North Carolina’s apportioned share of the federal alternative incremental credit.

North Carolina House Bill 1414, signed by Gov. Mike Easley on July 20, 2004, provides a new third alternative research and development tax credit. Under the new Article 3F credits, there are no eligible business tests. Any corporate taxpayer may claim the R&D credits under the new Article 3F provided they meet the requirements of the wage standards, health insurance, environmental impact, safety and health programs outlined under the existing Article 3A. Taxpayers can elect to claim only one of the three credits in a given tax year. (Please note that the eligible business requirement still applies to the two credits provided under Article 3A. Therefore, some taxpayers may qualify only for the new research and development credits under Article 3F.) A different election of which credit to claim can be made each year for different expenses. Taxpayers may also elect to claim the credit against either the income or the franchise tax. That election is made when the credit is claimed on the tax return and is binding. The credits cannot exceed fifty percent (50 percent) of the tax against which it is claimed. Any unused credits may be carried forward for 15 years.

Under the new Article 3F, a taxpayer that has qualified North Carolina research expenses is allowed a credit based on the applicable percentage of the expenses as determined under N.C.G.S §105-129.55(a). For taxpayers classified as small businesses (annual receipts under $1 million), the applicable percentage is 3 percent. For research expenses performed in an enterprise tier one, two or three area (low tier research), the applicable percentage is also 3 percent. For all other situations (other research), the applicable percentage depends on the amount of the qualified North Carolina research expenses; 1 percent for expenses up to $50 million, 2 percent for expenses between $50 million and $200 million and 3 percent for expenses above $200 million. The new legislation also grants an additional incentive for research expenses paid or incurred to a North Carolina research university for conducting qualified or basic research performed in North Carolina. In that case, taxpayers are allowed a credit equal to 15 percent of the expenses.

The new Article 3F research and development tax credits become effective for business activities occurring on or after May 1, 2005. The two alternative credits currently allowed under Article 3A are repealed for taxable years beginning on or after Jan. 1, 2006. Based on the fiscal note of similar legislation that was not enacted (House Bill 1415), it is estimated that credits totaling $75.1 million will be claimed during the state’s fiscal years 2005 through 2009, as a result of the new law.

For additional information, please contact Jack Harper at (704) 347-1674 or Jeff Rose at (919) 755-3043.


New law on workplace violence takes effect
By Louis Meyer, Poyner & Spruill, Raleigh
A new law regarding workplace violence in North Carolina becomes effective on Dec. 1. The new law establishes procedures for an employer to obtain a civil "no-contact" order on behalf of an employee when the employee is subjected to "unlawful conduct" by another person at the workplace. "Unlawful conduct" includes assault, attempted assault, a verbal or written threat, stalking, or harassment that occurs at the workplace. Actual physical injury to the employee or damage to the employer's property is not required for the issuance of a civil no-contact order.

The new law authorizes a court to issue a temporary or permanent no-contact order upon finding that an employee has suffered unlawful conduct. A temporary no-contact order may be issued by a court, without notice to the alleged wrongdoer, when there is good cause to believe that injury or harm to an employee is imminent and will occur before the alleged wrongdoer can respond to the request for the order or if he is given notice of it. A permanent no-contact order may be issued after the alleged wrongdoer has been served with a summons and there has been a court hearing.

A temporary or permanent no-contact order may require the alleged wrongdoer to cease visiting, molesting, assaulting, abusing, injuring, stalking, harassing, contacting, or interfering with the employee at the workplace. Temporary or permanent no-contact orders may also require the alleged wrongdoer to cease abusing, injuring, or interfering with the employer, the employer's property, or the employer's operations at the workplace. Under the new law, a violation of a civil no-contact order is punishable by contempt of court, which may result in a fine or imprisonment.

An employer is required by the new law to consult the employee who is the subject of the unlawful conduct, before seeking a civil no-contact order, to determine whether his or her participation in the process would cause any safety concerns for the employee. If the employee is unwilling to participate in seeking a no-contact order, the law prohibits an employer from taking any disciplinary action against the employee based on his or her level of participation or cooperation.

The new law specifically states that it does not expand, diminish, or modify the duty of any employer to provide a safe workplace for employees and other persons, and that it does not limit the ability of any employer or employee to pursue any other civil or criminal remedy provided by law.

In addition, the new law prohibits an employer from discharging, demoting, or disciplining an employee because the employee took reasonable time off from work to obtain a domestic violence protective order against a spouse, companion, or family member under state laws governing such orders, as long as the employee follows the employer's usual time-off policy or procedure. This provision was included to overrule the North Carolina Court of Appeals' decision earlier this year in Imes vs. City of Asheville. The Court held that an employer's termination of an employee, who had been shot by his spouse and claimed that he had been fired because he was a victim of domestic violence, was not a wrongful discharge in violation of public policy because the employee "failed to identify any specified North Carolina public policy that was violated by [the employer] in terminating his employment." The Court noted that no North Carolina statutes relating to domestic violence provided any sort of security from termination of employment for victims of domestic violence.



North Carolina qualified business venture tax credit
By Eugene H. Schlaman, Grant Thornton, Charlotte
On July 20, 2004, the state of North Carolina enacted House Bill 1414 that included a restructuring in the incentive provided by the North Carolina Qualified Business Venture Tax (QBV) Credit. The passage of this provision was the result of efforts by many interested parties.

Currently, North Carolina provides investors in QBV a credit of as much as 25 percent of the amount invested. Investors deemed eligible for the QBV credit include individuals who directly purchase equity securities or subordinated debt of a QBV. Individuals, with one or more investments, are limited to a credit of $50,000.

Additionally, non-QBV pass-through entities with committed capital under management of $5 million or less may also qualify for this credit. For investments prior to Jan. 1, 2004, the state limited the credit allowed to $6 million and restricted the utilization of this credit to Dec. 31, 2007. House Bill 1414 increased the credit limitation from $6 million to $7 million and extended the expiration period for both pass-through entities and initial investors to Dec. 31, 2008, for all investments made on or after Jan. 1, 2004. Corporations are not eligible for the QBV credit.

Once calculated at 25 percent of the initial investment, the QBV tax credit cannot exceed the amount of state tax liability reduced by the total of all other available credits, except for estimated tax payments. The amount of the disallowed portion of the QBV tax credit can be carried forward for five years. Limitations on credit allowance do not apply to carryover amounts.

Form D-499 must be filed to claim the credit and requires certain substantiating documentation. The credit is not available in the year of investment, but in the calendar year in which the application for the credit becomes effective. To be eligible for the tax credit, the taxpayer must file an application for the credit with the Secretary of Revenue on or before April 15 of the year following the calendar year in which the investment was made.

For additional information, contact Schlaman at Grant Thornton’s Charlotte office at (704) 632-6794.



Guidelines on using project development financing bonds
The Local Government Commission prepared the following directions that a city or county government must follow for approval of project development financing bonds. For illustration purposes, the private partner in the development project is referred to as ABC Co.

Define a Development Financing District – Unit officials will work with ABC Co. to define the development financing district (the “District”). The total land area of the District may not exceed 5% of the total land area of the unit. The District must be comprised of property that is either (a) blighted, deteriorating or undeveloped, (b) appropriate for rehabilitation or conservation activities or (c) appropriate for economic development of the community.

Establish Development Financing Plan - Unit officials and ABC Co. will work together to establish a development financing plan which, among other things, describes (i) the boundaries of the District, (ii) the proposed public and private development of the District, (iii) the costs of the proposed public activities, (iv) the sources and amounts of funds to pay for the public activities, (v) the base valuation of the District, (vi) the projected incremental increase in property valuation of the land located within the District after completion of the improvements, (vii) how the proposed development of the District will benefit the residents and business owners of the District in terms of jobs, affordable housing or services and (viii) any action which will be undertaken if the proposed project has a negative impact on residents or business owners of the District in terms of jobs, affordable housing, services or displacement. Before adopting a financing plan for the District, the unit must notify the board of county commissioners of the county in which the District is located of the development financing plan. Unless the board of county commissioners by resolution disapproves the proposed plan within 28 days, the unit may proceed to adopt the plan. Because ABC Co.’s headquarters will include manufacturing operations, the Department of Commerce and Department of Environment and Natural Resources must review the project. If the project does not involve manufacturing operations, these approvals are not necessary. Finally, after publishing a notice in the unit’s local newspaper and notifying property owners in the District as required by State law, the unit must hold a public hearing on the development financing plan. The plan may be adopted by the unit’s board any time after the public hearing is held.

Local Government Commission (LGC) Application and Approval – The unit must submit an application to the LGC, along with any statements of facts and documents concerning the proposed project development financing, the unit’s financial condition, the establishment of
the proposed development District, and the projected incremental tax revenues available for debt
service payments on the proposed debt instruments. In addition to its normal findings of sound debt management practices of the unit, the LGC must find the following: • That the unit has adopted a development financing plan. • That the proposed projects are feasible. • That the proposed project development financing is necessary to secure significant new project development for a district. • That the private development forecast in the development financing plan would not be likely to occur without the public projects to be financed by the project development financing. • That the incremental tax revenues accruing to the district, together with any other revenues pledged by the unit, will be sufficient to pay the proposed project development financing debt. • That the proposed project development financing debt can be marketed at reasonable interest cost to the unit.


Determination of Incremental Valuation – Once a unit has established the District and
the LGC has approved the financing, the unit must notify the county tax assessor who then
determines the base valuation of the District. The base valuation is the assessed value of all
taxable property located in the District on the January 1 immediately preceding the effective date
of the District. The base valuation may be adjusted if property is removed from or added to the
District. Each year the District is in existence, the tax assessor must determine the current
assessed value of taxable property located in the District. The assessor must also compute the difference between this current value and the base valuation of the District. If the current value
exceeds the base value, the difference is the incremental valuation of the District.

Revenue Increment Fund – Each unit establishing a development financing district must establish a separate fund (the “Revenue Increment Fund”) to account for the proceeds from
taxes levied on the incremental valuation of the District. Money in the Revenue Increment Fund
may be used to finance capital expenditures in the District, to meet principal and interest requirements on project development financing debt, to repay moneys expended on debt service
on project development financing debt instruments, and to establish and maintain debt service
reserves. Each year, after these purposes are satisfied, money remaining in the Revenue
Increment Fund shall be transferred to the General Fund of the unit.


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