GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
S	1
SENATE BILL 1088
     

 
Short Title:	Tax Restructuring Act of 2001.	()	
Sponsors:	Senators Clodfelter;  Ballance, Dannelly, Gulley, Hartsell, Kinnaird, Lucas, Martin of Guilford, Miller, and Reeves.	
Referred to:	Finance.	
April 5, 2001

A BILL TO BE ENTITLED
AN ACT TO CREATE AN EARNED INCOME TAX CREDIT, PHASE OUT THE REMAINING SALES TAX ON FOOD, REDUCE THE MARRIAGE TAX PENALTY, EXPAND THE PROPERTY TAX HOMESTEAD EXEMPTION, PROVIDE ADDITIONAL SALES TAX REVENUE FOR LOCAL GOVERNMENTS, AUTHORIZE ADDITIONAL REVENUE OPTIONS FOR LOCAL GOVERNMENTS, AND REPEAL CERTAIN REIMBURSEMENTS FOR REPEALED TAXES.

The General Assembly of North Carolina enacts:
TABLE OF CONTENTS
PART 1.	TITLE
PART 2.	EARNED INCOME TAX CREDIT
PART 3.	REDUCE MARRIAGE TAX PENALTY
PART 4.	PHASE OUT FOOD TAX
PART 5.	EXPAND HOMESTEAD PROPERTY TAX EXEMPTION
PART 6.	SALES TAX FOR LOCAL GOVERNMENTS
PART 7.	LOCAL OPTION MEALS TAX
PART 8.	LOCAL OPTION OCCUPANCY TAX
PART 9.	LOCAL OPTION VEHICLE TAG TAX
PART 10.	LOCAL OPTION EXCISE TAX ON CONVEYANCES
PART 11.	LOCAL GOVERNMENT REIMBURSEMENTS
PART 12.	EFFECTIVE DATES

PART 1.	TITLE
SECTION 1.  This act is the Tax Restructuring Act of 2001.
PART 2.	EARNED INCOME TAX CREDIT
SECTION 2.  Part 2 of Article 4 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-151.29.  Earned income tax credit.
(a)	Credit. – An individual who claims for the taxable year an earned income tax credit under section 32 of the Code is allowed a credit against the tax imposed by this Part equal to ten percent (10%) of the amount of credit the individual qualified for under section 32 of the Code. A nonresident or part-year resident who claims the credit allowed by this section must reduce the amount of the credit by multiplying it by the fraction calculated under G.S. 105-134.5(b) or (c), as appropriate.
(b)	Credit Refundable. – If the credit allowed by this section exceeds the amount of tax imposed by this Part for the taxable year reduced by the sum of all credits allowable, the Secretary must refund the excess to the taxpayer. The refundable excess is governed by the provisions governing a refund of an overpayment by the taxpayer of the tax imposed in this Part. Section 3507 of the Code, Advance Payment of Earned Income Credit, does not apply to the credit allowed by this section. In computing the amount of tax against which multiple credits are allowed, nonrefundable credits are subtracted before refundable credits."
PART 3.	REDUCE MARRIAGE TAX PENALTY
SECTION 3. G.S. 105‑134.6(c)(3) and (4) read as rewritten:
"(c)	Additions. – The following additions to taxable income shall be made in calculating North Carolina taxable income, to the extent each item is not included in taxable income:
. . .
(3)	Any amount deducted from gross income under section 164 of the Code as state, local, or foreign income tax to the extent that the taxpayer's total itemized deductions deducted under the Code for the taxable year exceed the standard deduction allowable to the taxpayer under the Code reduced by the amount  the taxpayer is required to add to taxable income under subdivision (4) of this subsection.
(4)	In the case of married individuals who file a joint return, the amount by which the taxpayer's standard deduction under the Code exceeds six thousand dollars ($6,000). In the case of a married individual filing a separate return, the amount by which the taxpayer's standard deduction under the Code exceeds three thousand dollars ($3,000). In the case of all other taxpayers, the amount by which the taxpayer's standard deduction has been increased for inflation under section 63(c)(4)(A) of the Code."
PART 4.	PHASE OUT FOOD TAX
SECTION 4.(a)  Effective for sales made on or after October 1, 2001, and before October 1, 2002, G.S. 105‑483 reads as rewritten:
"§ 105‑483.  Levy and collection of additional taxes.
Any county subject to this Article may levy one‑half percent (1/2%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Except as provided in this Article, the adoption, levy, collection, distribution, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Article, references to "this Article" mean Article 40 of this Chapter. The exemption for building materials in G.S. 105‑468.1 does not apply to taxes levied under this Article. A tax levied under this Article does not apply to sales of food exempt from the tax levied in Article 5 of this Chapter."
SECTION 4.(b)  Effective for sales made on or after October 1, 2001, and before October 1, 2002, G.S. 105‑498 reads as rewritten:
§ 105‑498.  Levy and collection of additional taxes.
Any county subject to this Article may levy one‑half percent (1/2%) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Except as provided in this Article, the adoption, levy, collection, distribution, administration, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. In applying the provisions of Article 39 of this Chapter to this Article, references to "this Article" mean Article 42 of this Chapter. The exemption for building materials in G.S. 105‑468.1 does not apply to taxes levied under this Article. A tax levied under this Article does not apply to sales of food exempt from the tax levied in Article 5 of this Chapter."
SECTION 4.(c)  G.S. 105‑164.13(38) reads as rewritten:
"(38)	Any of the following:
a.	Food and other items that may be lawfully purchased under the Food Stamp Program, 7 U.S.C. § 51,whether or not actually purchased under that Program.
b.	Supplemental foods lawfully purchased with a food instrument issued under the Special Supplemental Food Program, 42 U.S.C. § 1786.
c.	Supplemental foods purchased for direct distribution by the Special Supplemental Food Program."
SECTION 4.(d)  G.S. 105‑164.13B is repealed.
SECTION 4.(e)  G.S. 105‑465 reads as rewritten:
"§ 105‑465.  County election as to adoption of local sales and use tax.
The board of elections of any county, upon the written request of the board of county commissioners, or upon receipt of a petition signed by qualified voters of the county equal in number to at least fifteen percent (15%) of the total number of votes cast in the county, at the last preceding election for the office of Governor, shall call a special election for the purpose of submitting to the voters of the county the question of whether a one percent (1%) sales and use tax will be levied.
The special election shall be held under the same rules applicable to the election of members of the General Assembly. No new registration of voters shall be required. All qualified voters in the county who are properly registered not later than 21 days (excluding Saturdays and Sundays) prior to the election shall be entitled to vote at the election. The county board of elections shall give at least 20 days' public notice prior to the closing of the registration books for the special election.
The county board of elections shall prepare ballots for the special election. The question presented on the ballot shall be 'FOR one percent (1%) local sales and use tax on items subject to State sales and use tax at the general State rate' or 'AGAINST one percent (1%) local sales and use tax on items subject to State sales and use tax at the general State rate'.
The county board of elections shall fix the date of the special election, except that the special election shall not be held on the date or within 60 days of any biennial election for county officers, nor within one year from the date of the last preceding special election under this section."
SECTION 4.(f)  G.S. 105‑467 reads as rewritten:
"§ 105‑467.  Scope of sales tax.
(a)	Scope. -- The sales tax that may be imposed under this Article is limited to a tax at the rate of one percent (1%) of the items listed in this subsection. The sales tax authorized by this Article does not apply to sales that are taxable by the State under G.S. 105-164.4 but are not specifically included in this subsection.
(1)	The sales price of tangible personal property subject to the general rate of sales tax imposed by the State under G.S. 105‑164.4(a)(1) and (a)(4b).
(2)	The gross receipts derived from the lease or rental of tangible personal property when the lease or rental of the property is subject to the general rate of sales tax imposed by the State under G.S. 105‑164.4(a)(2).
(3)	The gross receipts derived from the rental of any room or other accommodations subject to the general rate of sales tax imposed by the State under G.S. 105‑164.4(a)(3).
(4)	The gross receipts derived from services rendered by laundries, dry cleaners, and other businesses subject to the general rate of sales tax imposed by the State under G.S. 105‑164.4(a)(4).
	(b)	Exemptions, Exclusions, and Refunds. -- The State exemptions and exclusions contained in G.S. 105‑164.13 and the State refund provisions contained in G.S. 105‑164.14 apply to the local sales and use tax authorized to be levied and imposed under this Article. A taxing county may not allow an exemption, exclusion, or refund that is not allowed under the State sales and use tax.
(c)	Situs. -- The local sales tax authorized to be imposed and levied under this Article applies to taxable transactions by retailers whose place of business is located within the taxing county. For the purpose of this Article, the situs of a transaction is the location of the retailer's place of business."
SECTION 4.(g)  Section 4(5) of Chapter 1096 of the 1967 Session Laws is repealed.
PART 5.	EXPAND HOMESTEAD PROPERTY TAX EXEMPTION
SECTION 5.(a)  G.S. 105‑277.1 reads as rewritten:
"§ 105‑277.1.  Property tax homestead exclusion.
(a)	Exclusion. – A permanent residence owned and occupied by a qualifying owner is designated a special class of property under  Section 2(2) of Article V of the North Carolina Constitution and is taxable in accordance with this section. The amount of the appraised value of the residence equal to the exclusion amount for the county in which the residence is located is excluded from taxation. The exclusion amount for each county is the greater of twenty‑five thousand dollars ($25,000) or an amount equal to one‑half of the median appraised value of owner‑occupied single-family homes in the county, determined as of the effective date of the most recent horizontal adjustment or reappraisal of real property. A qualifying owner is an owner who meets all of the following requirements as of January 1 preceding the taxable year for which the benefit is claimed:
(1)	Is at least 65 years of age or totally and permanently disabled.
(2)	Has an income for the preceding calendar year of not more than the income eligibility limit for the county. 
(3)	Is a North Carolina resident.
(a1)	Temporary Absence. – An otherwise qualifying owner does not lose the benefit of this exclusion because of a temporary absence from his or her permanent residence for reasons of health, or because of an extended absence while confined to a rest home or nursing home, so long as the residence is unoccupied or occupied by the owner's spouse or other dependent.
(a2)	Income Eligibility Limit. –  The income eligibility limit is the greater of the index amount or fifty percent (50%) of the median household income for the county in which the residence is located. Until July 1, 2003, the index amount is twenty‑five thousand dollars ($25,000). For taxable years beginning on or after July 1, 2003, the index amount is the amount for the preceding year increased by the same percentage of this amount as the percentage by which the federal government increased the benefits under Titles II and XVI of the Social Security Act during the calendar year preceding the year in which the determination of a new index amount is made, rounded to the nearest one hundred dollars ($100.00). 
On or before July 1 of each year, the Department of Revenue must determine the income eligibility limit to be in effect in each county for the taxable year beginning the following July 1 and must notify the assessor of each county of the amount to be in effect for that taxable year. To determine median household income, the Department must use the latest available data published by a State or federal agency generally recognized as having expertise concerning the data.
(b)	Definitions. –The following definitions apply in this section:
(1)	Code. – The Internal Revenue Code, as defined in G.S. 105‑228.90.
(1a)	Income. – Adjusted gross income, as defined in section 62 of the Code, plus all other moneys received from every source other than gifts or inheritances received from a spouse, lineal ancestor, or lineal descendant. For married applicants residing with their spouses, the income of both spouses must be included, whether or not the property is in both names.
(1b)	Owner. – A person who holds legal or equitable title, whether individually, as a tenant by the entirety, a joint tenant, or a tenant in common, or as the holder of a life estate or an estate for the life of another. A manufactured home jointly owned by husband and wife is considered property held by the entirety.
(2)	Repealed by Session Laws 1993, c. 360, s. 1.
(2a)	Repealed by Session Laws 1985 (Reg. Sess., 1986), c. 982, s. 20.
(3)	Permanent residence. – A person's legal residence. It includes the dwelling, the dwelling site, not to exceed one acre, and related improvements. The dwelling may be a single family residence, a unit in a multi‑family residential complex, or a manufactured home.
(4)	Totally and permanently disabled. – A person is totally and permanently disabled if the person has a physical or mental impairment that substantially precludes him or her from obtaining gainful employment and appears reasonably certain to continue without substantial improvement throughout his or her life.
(c)	Application. – An application for the exclusion provided by this section should be filed during the regular listing period, but may be filed and must be accepted at any time up to and through April 15 preceding the tax year for which the exclusion is claimed. When property is owned by two or more persons other than husband and wife and one or more of them qualifies for this exclusion, each owner shall apply separately for his or her proportionate share of the exclusion.
(1)	Elderly Applicants. – Persons 65 years of age or older may apply for this exclusion by entering the appropriate information on a form made available by the assessor under G.S. 105‑282.1.
(2)	Disabled Applicants. – Persons who are totally and permanently disabled may apply for this exclusion by (i) entering the appropriate information on a form made available by the assessor under G.S. 105‑282.1 and (ii) furnishing acceptable proof of their disability. The proof shall be in the form of a certificate from a physician licensed to practice medicine in North Carolina or from a governmental agency authorized to determine qualification for disability benefits. After a disabled applicant has qualified for this classification, he or she shall not be required to furnish an additional certificate unless the applicant's disability is reduced to the extent that the applicant could no longer be certified for the taxation at reduced valuation.
(d)	Multiple Ownership. – A permanent residence owned and occupied by husband and wife as tenants by the entirety is entitled to the full benefit of this exclusion notwithstanding that only one of them meets the age or disability requirements of this section. When a permanent residence is owned and occupied by two or more persons other than husband and wife and one or more of the owners qualifies for this exclusion, each qualifying owner is entitled to the full amount of the exclusion not to exceed his or her proportionate share of the valuation of the property. No part of an exclusion available to one co‑owner may be claimed by any other co‑owner and in no event may the total exclusion allowed for a permanent residence exceed the exclusion amount provided in this section.
(e)	Duties of Assessor. – The assessor of each county shall determine annually the exclusion amount for the county, as defined in subsection (a) of this section. The assessor shall publish the exclusion amount and the income eligibility limit to affected taxpayers in the county each year."
SECTION 5.(b)  G.S. 105‑309(f) reads as rewritten:
"(f)	The  notice set out below must appear on each abstract or on an information sheet distributed with the abstract. The abstract or sheet must include the address and telephone number of the assessor below the notice.

'PROPERTY TAX HOMESTEAD EXCLUSION FOR ELDERLY  OR PERMANENTLY DISABLED PERSONS.

North Carolina excludes from property taxes the first (assessor insert amount) in appraised value of a permanent residence owned and occupied by North Carolina residents aged 65 or older or totally and permanently disabled whose income does not exceed an income limit of (assessor insert amount). Income means the owner's adjusted gross income as determined for federal income tax purposes, plus all moneys received other than gifts or inheritances received from a spouse, lineal ancestor or lineal descendant.
If you received this exclusion in (assessor insert previous year), you do not need to apply again unless you have changed your permanent residence. If you received the exclusion in (assessor insert previous year) and your income in (assessor insert previous year) was above the income limit, you must notify the assessor. If you received the exclusion in (assessor insert previous year) because you were totally and permanently disabled and you are no longer totally and permanently disabled, you must notify the assessor. If the person receiving the exclusion in (assessor insert previous year) has died, the person required by law to list the property must notify the assessor. Failure to make any of the notices required by this paragraph before April 15 will result in penalties and interest.
If you did not receive the exclusion in (assessor insert previous year) but are now eligible, you may obtain a copy of an application from the assessor. It must be filed by April 15.' "
PART 6.	SALES TAX FOR LOCAL GOVERNMENTS
SECTION 6.(a)  The introductory language of G.S. 105‑164.4(a) 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 (4.5%)."
SECTION 6.(b)  Article 5 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-164.44F. Tax sharing with local governments.
The Secretary shall distribute to local governments each year the amounts provided in this section, the total of which is approximately one‑ninth of the State's tax levied under this Article at the general rate of tax. Each quarter, the Secretary shall remit to each local government entitled to a distribution of local tax proceeds under Articles 40 and 42 of this Chapter a distribution of State funds in an amount equal to fifty percent (50%) of the amount of local taxes to be distributed to the local government under those Articles for that quarter. The Secretary shall draw the State funds to be distributed from collections under this Article."
SECTION 6.(c)  Subchapter VIII of Chapter 105 of the General Statutes is amended by adding a new Article to read:
"Article 44.
"Third One-Half Cent (½¢) Local Government Sales and Use Tax.
"§ 105-515.  Short title.
This Article is the Third One-Half Cent (½¢) Local Government Sales and Use Tax Act.
"§ 105-516.  Limitations.
This Article applies only to counties that levy the first one‑cent (1¢) sales and use tax under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws, the first one‑half cent (½¢) local sales and use tax under Article 40 of this Chapter, and the second one‑half cent (½¢) local sales and use tax under Article 42 of this Chapter.
"§ 105-517.  Levy.
(a)	After Vote. – If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the taxes in a county, the board of commissioners of the county may, by resolution, levy one‑half percent (½¢) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law.
(b)	Without Vote. – If the question of whether to levy taxes under this Article has not been defeated in a referendum held in the county, the board of commissioners of the county may, by resolution, levy one‑half percent (½¢) local sales and use taxes in addition to any other State and local sales and use taxes levied pursuant to law. Before adopting a resolution under this subsection, the board of commissioners must give at least 10 days' public notice of its intent to adopt the resolution and must hold a public hearing on the issue of adopting the resolution.
"§ 105-518. County election on adoption of tax.
(a)	Resolution. – The board of commissioners of a county may direct the county board of elections to conduct an advisory referendum on the question of whether to levy local one‑half percent (½¢) sales and use taxes in the county as provided in this Article. The election shall be held on a date jointly agreed upon by the two boards and shall be held in accordance with the procedures of G.S. 163-287.
(b)	Ballot Question. – The form of the question to be presented on a ballot for a special election concerning the levy of the taxes authorized by this Article shall be:
'[ ] FOR	[ ] AGAINST
one‑half percent (½¢) local sales and use taxes, in addition to the current local sales and use taxes.'
"§ 105-519.  Administration of taxes.
Except as provided in this Article, the adoption, levy, collection, administration, distribution, and repeal of these additional taxes shall be in accordance with Article 39 of this Chapter. A tax levied under this Article does not apply to the sales price of food that is not otherwise exempt from tax pursuant to G.S. 105-164.13 but would be exempt from the State sales and use tax pursuant to G.S. 105-164.13 if it were purchased under the Food Stamp Program, 7 U.S.C. § 51."
SECTION 6.(d)  A tax levied under Article 44 of Chapter 105 of the General Statutes, as enacted by this act, does not apply to construction materials purchased to fulfill a lump‑sum or unit‑price contract entered into or awarded before the effective date of the levy or entered into or awarded pursuant to a bid made before the effective date of the levy when the construction materials would otherwise be subject to the tax levied under Article 44 of Chapter 105 of the General Statutes.
PART 7.	LOCAL OPTION MEALS TAX
SECTION 7.  Subchapter VIII of Chapter 105 of the General Statutes is amended by adding a new Article to read:
"Article 45.
"Local Government Meals Tax.
"§ 105-525.  Short title.
This Article is the Local Government Meals Tax Act.
"§ 105-526.  Definitions.
The definitions in G.S. 105-164.3 apply to this Article. In addition, the following definitions apply in this Article:
(1)	City. – Defined in G.S. 153A‑1.
(2)	Person. – Defined in G.S. 105‑228.90.
(3)	Taxing unit. – A city or a county.
"§ 105-527.  Effect of local acts.
This Article supplements but does not supplant the authority of a county or a city to levy a meals tax pursuant to a local act. If a local act authorizes a county to levy a meals tax, the maximum rate the county could otherwise levy under this Article is reduced by the maximum rate the county is authorized to levy under all local acts. If a local act authorizes a city to levy a meals tax, the maximum rate the county in which the city is located could otherwise levy under this Article is reduced by the maximum rate the city is authorized to levy under all local acts.
"§ 105-528.  Levy.
(a)	After Vote. – If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the tax in a county, the board of commissioners of the county may, by resolution, levy a local meals tax of up to one percent (1%).
(b)	Without Vote. – If the question of whether to levy a tax under this Article has not been defeated in a referendum held in the county, the board of commissioners of the county may, by resolution, levy a local meals tax of up to one percent (1%). Before adopting a resolution under this subsection, the governing body must give at least 10 days' public notice of its intent to adopt the resolution and must hold a public hearing on the issue of adopting the resolution.
(c)	Scope. – The tax applies to the sales price of prepared food and drink sold within the county at retail, for consumption on or off the premises, by a retailer within the county that is subject to sales tax under G.S. 105‑164.4(a)(1). A tax levied under this Article is in addition to any other State and local sales and use taxes levied pursuant to law.
(d)	Effective Date. – A meals tax becomes effective on the date specified in the resolution levying the tax. That date must be the first day of a calendar month, however, and may not be earlier than the first day of the second month after the date the resolution is adopted.
(e)	Vote. – The board of commissioners of a county may direct the county board of elections to conduct an advisory referendum on the question of whether to levy a local meals tax in the county as provided in this Article. The election shall be held on a date jointly agreed upon by the two boards and shall be held in accordance with the procedures of G.S. 163-287. The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be:
'[ ] FOR   [ ] AGAINST
[X] percent (X%) county meals tax, in addition to the current local sales and use taxes.'
"§ 105-529.  Exemptions.
A meals tax levied under this Article does not apply to the following sales of prepared food and drink:
(1)	Prepared food and drink served to residents in boarding houses and sold together on a periodic basis with rental of a sleeping room or lodging.
(2)	Retail sales exempt from taxation under G.S. 105‑164.13.
(3)	Retail sales through or by means of vending machines.
(4)	Prepared food and drink served by a retailer subject to the local occupancy tax if the charge for the prepared food and drink is included in a single, nonitemized sales price together with the charge for rental of a room, lodging, or accommodation furnished by the retailer.
(5)	Prepared food and drink furnished without charge by an employer to an employee.
(6)	Retail sales by grocers or by grocery sections of supermarkets or other diversified retail establishments, other than sales of prepared food and drink in the delicatessen or similar department of the grocer or grocery section.
"§ 105-530.  Collection.
Every retailer subject to a tax levied under this Article must, on and after the effective date of the levy of the tax, collect the tax. This tax must be collected as part of the charge for furnishing prepared food and drink. The tax must be stated and charged separately from the sales records and must be paid by the purchaser to the retailer as trustee for and on account of the county. The tax must be added to the sales price and passed on to the purchaser instead of being borne by the retailer. The county must design, print, and furnish to all appropriate businesses and persons in the county the necessary forms for filing returns and instructions to ensure the full collection of the tax.
"§ 105-531.  Administration.
The county must administer a tax levied under this Article. A tax levied under this Article is due and payable to the county finance officer in monthly installments on or before the 15th day of the month following the month in which the tax accrues. Every retailer liable for the tax must, on or before the 15th day of each month, prepare and file a return on a form prescribed by the county. The return must show the total gross receipts derived in the preceding month from sales to which the tax applies.
A return filed with the county finance officer under this Article is not a public record and may not be disclosed except as provided in G.S. 153A-148.1.
"§ 105-532.  Distribution and use.
(a)	Distribution. – The taxing county must distribute the net proceeds of the tax levied under this Article quarterly between the county and its cities on a per capita basis. To make the per capita distributions required by this section, the county must first compute a per capita distributable amount by dividing the amount to be distributed by the total population of the county plus the population of all cities located in the county. The county must then distribute to each taxing unit in the county, including the county itself, the product of the population of the taxing unit and the per capita distributable amount. In making the per capita calculations under this section, the county must use the most recent annual population estimates certified by the State Planning Officer.
(b)	Use. – Cities and counties may use the proceeds of a tax levied under this Article for any lawful purpose.
"§ 105-533.  Refunds.
The county must refund to a nonprofit or governmental entity the meals tax paid by the entity on eligible purchases of prepared food and drink. A nonprofit or governmental entity's purchase of prepared food and drink is eligible for a refund under this section if the entity is entitled to a refund under G.S. 105‑164.14(b) or (c) of local sales and use tax paid on the purchase. The time limitations, application requirements, penalties, and restrictions provided in G.S. 105‑164.14(b) and (d) apply to refunds to nonprofit entities; the time, limitations, application requirements, penalties, and restrictions provided in G.S. 105‑164.14(c) and (d) apply to refunds to governmental entities. When an entity applies for a refund of the meals tax paid by it on purchases, it must attach to its application a copy of the application submitted to the Department of Revenue under G.S. 105-164.14 for a refund of the sales and use tax on the same purchases. An applicant for a refund under this subsection must provide any information required by the county to substantiate the claim.
"§ 105-534.  Penalties.
A person that fails or refuses to file the return or pay a tax levied under this Article is subject to the civil and criminal penalties set by G.S. 105-236 for failure to pay or file a return for State sales and use taxes. The board of commissioners of the taxing county has the same authority to waive the penalties for a tax levied under this Article that the Secretary of Revenue has to waive the penalties for State sales and use taxes.
"§ 105-535.  Repeal or reduction.
A meals tax levied under this Article may be repealed or reduced by a resolution adopted by the board of commissioners of the taxing county. Repeal or reduction of a meals tax must become effective on the first day of a month and may not become effective until the end of the fiscal year in which the resolution was adopted. Repeal or reduction of a meals tax does not affect a liability for a tax that was attached before the effective date of the repeal or reduction, nor does it affect a right to a refund of a tax that accrued before the effective date of the repeal or reduction."
PART 8.	LOCAL OPTION OCCUPANCY TAX
SECTION 8.(a)  Subchapter VIII of Chapter 105 of the General Statutes is amended by adding a new Article to read:
"Article 46.
"Local Government Occupancy Tax.
"§ 105-540.  Definitions.
The following definitions apply in this Article:
(1)	City. – Defined in G.S. 153A‑1.
(2)	Taxing unit. – A city or a county.
"§ 105-541.  Effect of local acts.
(a)	Limitations. – This Article supplements but does not supplant the authority of a county or a city to levy an occupancy tax pursuant to a local act. If a local act authorizes a county to levy an occupancy tax, the maximum rate the county could otherwise levy under this Article is reduced by the maximum rate the county is authorized to levy under all local acts, and the maximum rate any city in the county could otherwise levy under this act may not exceed a total of six percent (6%) when added to the maximum rate the county is authorized to levy under all local acts. If a local act authorizes a city to levy an occupancy tax, the maximum rate the city could otherwise levy under this Article is reduced by the maximum rate the city is authorized to levy under all local acts. 
(b)	Examples of Limitations. – The following examples illustrate the limitations provided in subsection (a) of this section:
(1)	If a local act authorizes a city to levy an occupancy tax of up to one percent (1%), the maximum rate the city can levy under this Article is two percent (2%), whether or not it levies the tax authorized by local act.
(2)	If a local act authorizes a county to levy an occupancy tax of up to six percent (6%), neither the county nor any city in the county may levy an occupancy tax under this Article, whether or not the county levies the tax authorized by local act.
"§ 105-542.  Levy.
(a)	After Vote. – If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the tax within a taxing district, the governing body of the taxing district may, by resolution, levy a local occupancy tax of up to the maximum rate provided in this Article.
(b)	Without Vote. – If the question of whether to levy a tax under this Article has not been defeated in a referendum held in the taxing unit, the governing body of the taxing unit may, by resolution, levy a local occupancy tax of up to the maximum rate provided in this Article. Before adopting a resolution under this subsection, the governing body must give at least 10 days' public notice of its intent to adopt the resolution and must hold a public hearing on the issue of adopting the resolution.
(c)	Maximum Rate. – Subject to the limitations provided in G.S. 105‑526, the maximum rate of tax that a county may levy under this Article is a total of six percent (6%) when added to the rate of any occupancy tax levied by a city within the county. Subject to the limitations provided in G.S. 105‑526, the maximum rate of tax that a city may levy under this Article is three percent (3%). 
(d)	Scope. – The tax applies to the gross receipts derived from the rental of any room, lodging, or accommodation furnished by a hotel, motel, inn, tourist camp, or similar place within the taxing unit that is subject to sales tax imposed by the State under G.S. 105‑164.4(a)(3). The tax is in addition to any State or local sales tax.
(e)	Vote. – The governing body of a taxing unit may direct the county board of elections to conduct an advisory referendum on the question of whether to levy a local occupancy tax in the taxing unit as provided in this Article. The election shall be held on a date jointly agreed upon by the governing body and the board of elections and shall be held in accordance with the procedures of G.S. 163-287.
(f)	Ballot Question. – The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be:
'[ ] FOR   [ ] AGAINST
[X] percent (X%) local occupancy tax, in addition to the current local sales and occupancy taxes.'
"§ 105-543.  Administration.
A tax levied under this Article shall be levied, administered, collected, and repealed as provided in G.S. 153A‑155 in the case of a county tax and in G.S. 160A‑215 in the case of a city tax. The penalties provided in G.S. 153A‑155 and G.S. 160A‑215 apply to a tax levied under this Article.
"§ 105-544.  Use.
A taxing unit may use the proceeds of a tax levied under this Article for any lawful purpose."
SECTION 8.(b)  G.S. 153A‑155 and G.S. 160A‑215 are amended to apply to all counties and municipalities in the State.  Accordingly, G.S. 153A‑155(a) and (g) and G.S. 160A‑215(a) and (g) are repealed.
PART 9.	LOCAL OPTION VEHICLE TAG TAX
SECTION 9.  G.S. 20‑97 reads as rewritten:
"§ 20‑97.  Taxes credited to Highway Fund; municipal vehicle taxes.
(a)	State Taxes to Highway Fund. – All taxes levied under this Article are compensatory taxes for the use and privileges of the public highways of this State. The taxes collected shall be credited to the State Highway Fund. Except as provided in this section, no county or municipality shall levy any license or privilege tax upon any motor vehicle licensed by the State.
(b)	General Municipal Vehicle Tax. – Cities and towns may levy a tax of not more than five dollars ($5.00) per year upon any vehicle resident in the city or town. The proceeds of the tax may be used for any lawful purpose.
(b1)	General County Vehicle Tax. – A county may levy a tax of not more than five dollars ($5.00) per year upon any vehicle resident in the county. The proceeds of the tax may be used for any lawful purpose. A taxing county must distribute the net proceeds of a tax levied under this subsection between the county and the cities and towns located in the county according to the formula by which local sales tax proceeds are divided between the county and its cities and towns under G.S. 105‑472 or under Chapter 1096 of the 1967 Session Laws.
(c)	Municipal Vehicle Tax for Public Transportation. – A city or town that operates a public transportation system as defined in G.S. 105‑550 may levy a tax of not more than five dollars ($5.00) per year upon any vehicle resident in the city or town. The tax authorized by this subsection is in addition to the tax authorized by subsection (b) of this section. A city or town may not levy a tax under this section, however, to the extent the rate of tax, when added to the general motor vehicle taxes levied by the city or town under subsection (b) of this section and under any local legislation, would exceed thirty dollars ($30.00) per year. The proceeds of the tax may be used only for financing, constructing, operating, and maintaining local public transportation systems. Cities and towns shall use the proceeds of the tax to supplement and not to supplant or replace existing funds or other resources for public transportation systems. This subsection does not apply to the City of Durham or to the cities and towns in Gaston County.
(d)	Municipal Taxi Tax. – Cities and towns may levy a tax of not more than fifteen dollars ($15.00) per year upon each vehicle operated in the city or town as a taxicab. The proceeds of the tax may be used for any lawful purpose.
(e)	No Additional Local Tax. – No county, city or town may impose a franchise tax, license tax, or other fee upon a motor carrier unless the tax is authorized by this section. "
PART 10.	LOCAL OPTION EXCISE TAX ON CONVEYANCES
SECTION 10.  Subchapter VIII of Chapter 105 of the General Statutes is amended by adding a new Article to read:
"Article 47.
"Local Government Excise Tax on Conveyances.
"§ 105-550.  Effect of local acts.
This Article supplements but does not supplant the authority of a county or a city to levy an excise tax on conveyances pursuant to a local act. If a local act authorizes a county to levy an excise tax on conveyances, the maximum rate the county could otherwise levy under this Article is reduced by the maximum rate the county is authorized to levy under all local acts. If a local act authorizes a city to levy an excise tax on conveyances, the maximum rate the county in which the city is located could otherwise levy under this Article is reduced by the maximum rate the city is authorized to levy under all local acts. 
"§ 105-551.  Levy.
(a)	After Vote. – If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the tax in a county, the board of commissioners of the county may, by resolution, levy a local excise tax on conveyances at a rate of up to one percent (1%) on instruments conveying interests in real property located in the county. 
(b)	Without Vote. – If the question of whether to levy a tax under this Article has not been defeated in a referendum held in the county, the board of commissioners of the county may, by resolution, levy a local excise tax on conveyances at a rate of up to one percent (1%) on instruments conveying interests in real property located in the county. Before adopting a resolution under this subsection, the governing body must give at least 10 days' public notice of its intent to adopt the resolution and must hold a public hearing on the issue of adopting the resolution.
(c)	Basis and Effective Date. – The tax applies to the consideration or value, whichever is greater, of the interest conveyed, including the value of any lien or encumbrance remaining on the property at the time of sale. The levy of the tax may become effective only on the first day of a calendar month set in the resolution levying the tax, which may not be earlier than the first day of the second succeeding calendar month after the date the resolution is adopted.
(d)	Vote. – The board of commissioners of a county may direct the county board of elections to conduct an advisory referendum on the question of whether to levy a local excise tax on conveyances in the county as provided in this Article. The election shall be held on a date jointly agreed upon by the two boards and shall be held in accordance with the procedures of G.S. 163-287. The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be:
'[ ] FOR   [ ] AGAINST
[X] percent (X%) county excise tax on conveyances of real property, in addition to the current State excise tax on conveyances of real property.'
"§ 105-552.  Administration.
(a)	Resolution. – The board of commissioners of a county must, upon adoption of a resolution levying a tax under this Article, immediately deliver a certified copy of the resolution to the register of deeds of the county. Upon receipt of this document, the register of deeds shall administer the tax in the county as provided in this Article.
(b)	Scope. – A tax levied under this Article does not apply to a transfer exempt pursuant to G.S. 105‑228.28 or G.S. 105‑228.29 from the tax levied by Article 8E of this Chapter. In addition, the tax does not apply to a transfer to the owner's spouse, siblings, parents, grandparents, children, or grandchildren.
The tax is in addition to the tax levied by Article 8E of this Chapter. A tax levied under this Article applies to transfers of interests in real property located within the county. If the property is located in two or more counties, a transfer of an interest in the property is taxable only by the county in which the greater part of the property, with respect to value, lies.
(c)	Collection. – A tax levied under this Article is payable by the transferor of the interest. Except as otherwise provided in this Article, the provisions of G.S. 105‑228.31 through G.S. 105‑228.36 apply to a tax levied under this Article. The county must provide metering or similar equipment for the collection of the tax in lieu of the use of tax stamps.(d)	Repeal or Reduction. – A taxing county may, by resolution, repeal or reduce the rate of a tax levied under this Article. Repeal or reduction of the tax must become effective on the first day of a month and may not become effective until the end of the fiscal year in which the repeal or reduction resolution was adopted. Repeal of an excise tax on conveyances, or reduction of its rate, under this Article does not affect a liability for a tax that attached before the effective date of the repeal or reduction, nor does it affect a right to a refund of a tax that accrued before the effective date of the repeal or reduction.
"§ 105-553.  Distribution and use.
A taxing county must distribute the net proceeds of a tax levied under this Article between the county and the cities and towns located in the county according to the formula by which local sales tax proceeds are divided between the county and its cities and towns under G.S. 105‑472 or under Chapter 1096 of the 1967 Session Laws. The proceeds of the tax may be used for any lawful purpose."
PART 11.	LOCAL GOVERNMENT REIMBURSEMENTS
SECTION 11.  The following sections of the General Statutes are repealed:
(1)	G.S. 105‑164.44C. Reimbursement for sales taxes on food stamp foods and supplemental foods.
(2)	G.S. 105‑275.1. Reimbursement for exclusion of manufacturers' inventories and poultry and livestock.
(3)	G.S. 105‑275.2. Reimbursement to counties and municipalities for repeal of State tax on intangible personal property.
(4)	G.S. 105‑277.001. Reimbursement for exclusion of retailers' and wholesalers' inventories.
(5)	G.S. 105‑277.1A. Property classified for taxation at reduced valuation; duties of tax collectors; reimbursement of localities for portion of tax lost.
PART 12.	EFFECTIVE DATES
SECTION 12.  This act becomes effective as follows:
(1)	General. – Except as otherwise provided in this act, this act is effective when it becomes law.
(2)	Earned Income Tax Credit. – Part 2 of this act is effective for taxable years beginning on or after January 1, 2001.
(3)	Reduce Marriage Tax Penalty. – Part 3 of this act is effective for taxable years beginning on or after January 1, 2001.
(4)	Phase Out Food Tax. – Sections 4(a) and 4(b) of this act become effective October 1, 2001, apply to sales made on or after that date, and are repealed effective for sales made on or after October 1, 2002. The remainder of Part 4 of this act becomes effective October 1, 2002, and applies to sales made on or after that date.
(5)	Expand Homestead Property Tax Exemption. – Part 5 of this act is effective for taxes imposed for taxable years beginning on or after July 1, 2002.
(6)	Sales Tax for Local Governments. – Section 6(a) of this act becomes effective October 1, 2001, and applies to sales made on or after that date.  Section 6(b) of this act becomes effective January 1, 2002.  The remainder of Part 6 of this act is effective when it becomes law.
(7)	Local Option Taxes. – Parts 7 through 10 of this act are effective when it becomes law.
(8)	Local Government Reimbursements. – Part 11 of this act becomes effective July 1, 2001.