A BILL TO BE ENTITLED
AN ACT to raise the sales tax rate and remove the cap on sales of certain machinery and equipment; to repeal the tax credit for investing in machinery and equipment; to conform state income tax on banks to federal income tax on banks; to provide that nexus may BE based on a substantial customer base; and to repeal the guaranty fund tax credit.
The General Assembly of North Carolina enacts:
SECTION 1.(a)  G.S. 105‑164.4(a)(1d) reads as rewritten:
"(a)	A privilege tax is imposed on a retailer at the following percentage rates of the retailer's net taxable sales or gross receipts, as appropriate. The general rate of tax is four and one‑half percent (4 1/2%).
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(1d)	The rate of two percent (2%) applies to the sales price of the articles listed in G.S. 105‑164.4A. As used in G.S. 105‑164.4A and G.S. 105‑187.51, the term "accessories" does not include electricity.
a.	through k. Recodified as § 105‑164.4A by Session Laws 1999‑360, s. 3(a), effective August 4, 1999."
SECTION 1.(b)  The catch line of G.S. 105‑164.4A reads as rewritten:
"§ 105‑164.4A.  Articles taxed at two percent (2%)."
SECTION 1.(c)  This section becomes effective July 1, 2002, and applies to sales made on or after that date.
SECTION 2.(a)  G.S. 105‑129.9 is repealed.
SECTION 2.(b)  This section is effective for business activities occurring on or after January 1, 2003.
SECTION 3.(a)  G.S. 105‑130.5(a) is amended by adding a new subdivision to read:
"(a)	The following additions to federal taxable income shall be made in determining State net income:
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(2a)	That portion of a financial institution's interest expense that is allocable to interest income exempt from taxation under this Part. The allocable portion of the interest expense is the portion for which deduction would be disallowed pursuant to section 265(b) of the Code if the interest were earned on a tax-exempt obligation as defined in section 265(b) of the Code."
SECTION 3.(b)  This section is effective for taxable years beginning on or after January 1, 2002.
SECTION 4.(a)  G.S. 105‑228.5A is repealed.
SECTION 4.(b)  This section is effective for taxable years beginning on or after January 1, 2003.
SECTION 5.(a)  G.S. 105‑228.90(b) is amended by adding a new subdivision to read:
"(b)	Definitions. – The following definitions apply in this Article:
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(4)	Financial institution. – Any of the following:
a.	A holding company.
b.	A regulated financial corporation.
c.	A person engaged in the business of a financial institution."
SECTION 5.(b)  G.S. 105‑250 reads as rewritten:
"§ 105‑250.  Law applicable to foreign corporations.
(a)	All foreign corporations, and the officers and agents thereof, doing business in this State, shall be subject to all the liabilities and restrictions that are or may be imposed upon corporations of like character, organized under the laws of this State, and shall have no other or greater powers.
(b)	A financial institution is doing business in this State if it meets one or more of the following conditions:
(1)	It maintains an office in this State.
(2)	It has an employee, representative, or independent contractor conducting business in this State.
(3)	It regularly sells products or services of any kind to customers in this State who receive the product or service in this State.
(4)	It regularly solicits business from potential customers in this State.
(5)	It regularly performs services outside this State that are consumed in this State.
(6)	It regularly engages in transactions with customers in this State that involve intangible property, including loans, and result in receipts flowing to the financial institution from within this State.
(7)	It owns or leases property located in this State.
(8)	It regularly solicits and receives deposits from customers in this State.
(c)	There is a rebuttable presumption that a financial institution is doing business in this State if the sum of its assets and the absolute value of its deposits attributable to sources within this State equals or exceeds five million dollars ($5,000,000)."
SECTION 6.  Except as otherwise provided, this act is effective when it becomes law.