CRMCA NC Legislative Update 

July 15, 2020

By Lexi Arthur

The NC General Assembly (NCGA) officially adjourned last week, and the adjournment resolution that was previously passed will bring the legislature back on September 3 in order to appropriate the remaining federal COVID funds. Lawmakers hope that the federal government will give the legislature more leeway in how those funds can be spent, which would allow the legislature to backfill its revenue shortfalls in the budget.

However, the NCGA could return earlier than that, as Governor Cooper’s staff has indicated the Governor’s plan to call lawmakers back into session upon receiving further direction from the federal government on spending the COVID funds. The US Senate will return to session on July 20th, after their 4th of July recess. The Governor and legislative leaders all recognize that the easiest way to balance the budget, which is required under the North Carolina constitution, is to allocate the federal funds to cover the state budget deficit. After tax revenues become clear following the July 15 tax filing deadline, the budget landscape will also become clearer.

Another uncertainty is whether the federal government will provide additional federal assistance to state and local governments. Additional funding could be used to make up for the transportation cuts made in the most recent transportation budget bill (HB 77). With Congress typically heading home in August, states around the country are waiting to see if they’ll receive further financial help. 

DOT 2020-2021 FY Budget/Governance (HB 77 / Ch. SL 2020-91) became law on July 6, 2020 without Governor Cooper’s signature. It provides NC DOT funding in the wake of COVID-19-related revenue declines at the Department. It also provides oversight and restructuring of the department’s board after a recent audit revealed overspending. The bill will let legislative leaders pick six members of the Board of Transportation. Currently, all 19 voting members of the board are chosen by Gov. Roy Cooper. For more details on this bill, click here. 

Of particular interest to employers across the state were continued efforts to change the workers’ compensation law to create a rebuttable presumption that employees who are infection with COVID-19 contracted the disease in the course of employment. Rep. Darren Jackson (D-Wake) made at least two attempts during the last few weeks of session to include this provision in bills on the House floor by offering amendments. While there was discussion on his amendments, they were not officially considered for a vote. Rep. Jackson’s proposal was included in legislation that was filed earlier in the session, but received major pushback from the employer community and did not move forward.

Revenue Laws Recommendations (HB 1080) was signed into law on June 30th. This bill makes numerous tax law changes, including decoupling from federal law so that the limitation on deduction of business expense in NC remains 30% (instead of 50%). It also requires a taxpayer to add the amount of any expense deducted under the Internal Revenue Code to the extent that payment of the expense resulted in forgiveness of a loan covered under the Paycheck Protection Program so that a taxpayer does not receive a double tax benefit by receiving a deduction for expenses paid with tax exempt income.

As the North Carolina economy reopens, individuals receiving unemployment benefits have had to decide whether to return to work amid the continuing COVID-19 public health emergency. Until recently, opting not to return to a prior employer or refusing to accept suitable work likely meant the discontinuation of unemployment benefits. The North Carolina Division of Employment Security (DES) recently adopted emergency rule 04 N.C. Admin. Code § 24G.0104. This rule became effective on June 26, 2020 and outlines the specific situations related to COVID-19 in which an individual may refuse suitable work and continue to receive unemployment benefits. There are two important things that the new emergency rule did not change. It left intact Section 3(b) of North Carolina Executive Order No. 118, issued March 17, 2020, which clarifies that unemployment benefits paid for reasons related to COVID-19 are not charged to employer accounts. It also left intact previous emergency rule 04 N.C. Admin. Code § 24G.0102, which implemented a requirement that employers provide employees with notice of unemployment benefits at the time they are separated from employment.