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2016 Legislative Review
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Occupancy Tax Guidelines Withstand Challenge

NCRLA and its allies succeeded in preserving the occupancy tax guidelines and deflecting forceful efforts to authorize noncompliant occupancy taxes in Jacksonville, Sanford, and Cumberland County during the final days of the 2016 legislative session.

Matters came to a head on the very last day of session – last Friday, July 1 – when Senate Majority Leader Harry Brown asked the House Finance Committee to support Senate Bill 46. In violation of the guidelines, that bill would have permitted the City of Jacksonville to use only one third of occupancy tax proceeds for tourism promotion (rather than the required two thirds) while using two thirds of the proceeds for tourism related expenditures (rather than the maximum one third).

After a spirited 45-minute debate over SB 46 – including testimony from NCRLA General Counsel and Lobbyist Frank Gray in support of the guidelines and against the bill – the Committee voted 19 to 8 NOT to support SB 46. Read the WRAL story.

Debate over the Jacksonville bill came on the heels of a failed attempt by Sen. Wesley Meredith to revive an even more controversial proposal for Cumberland County, prompting the Fayetteville Observer to ask in a scathing editorial, “would somebody please drive a big stake through the heart of this truly bad idea and make sure it never comes back?” The editorial continued, “we thought we'd seen the last of a legislative measure that would essentially fold up Cumberland County's Tourism Development Authority and its Convention and Visitors Bureau. . . . The attempt to kill the tourism authority is what stopped [this] legislation last year. The hotel and tourism industry has considerable power in the General Assembly. The requirement that revenue go directly to a tourism authority and be spent to promote tourism has been pretty much bulletproof, at least until now.” Read the editorial.

Adding insult to injury, Senator Meredith also proposed to extend and expand the existing Cumberland County meals tax, an effort that NCRLA likewise opposed.

The Cumberland County proposal fell short when – after days of lobbying by NCRLA and its allies – the House voted 115-0 to reject Senate changes to House Bill 1039 that would have authorized non-compliant occupancy taxes in Jacksonville, Sanford, and Cumberland County (as well as compliant occupancy taxes for Sampson and Harnett Counties).

The only occupancy tax proposal that passed both the House and Senate this year was Senate Bill 50, which authorizes an increase in the Wilson occupancy tax from 3 to 6 percent in a manner that, after much discussion and negotiation, was brought into compliance with the occupancy tax guidelines.



Budget Increases Tourism Funding, Streamlines Travel & Tourism Board

The budget that passed the House and Senate last week includes an additional $1 million in non-recurring funding for tourism promotion, which NCLRA and its allies strongly supported. This funding is in addition to the $1 million in recurring funding that was included in last year’s budget. The budget also includes $3.75 million in new marketing funding for Department of Commerce/Economic Development Partnership NC job recruitment efforts, divided between domestic and international marketing efforts.

In addition, the budget includes a provision that would decrease the size of the state Travel & Tourism Board from 29 to 19 members. Under the proposal, NCRLA would designate one member of the Board to represent the restaurant sector and a second member to represent the lodging sector. The Chair of the NC Travel & Tourism Coalition and an additional member of the Coalition would also serve on the Board, as would the NC Secretary of Commerce, the CEO of the Economic Development Partnership of NC (EDPNC), and an additional designee of EDPNC.

The remaining members would include:
• A designee of the Destination Marketing Association of NC;
• A designee of the NC Travel Industry Association;
• Two members appointed by the Governor;
• Four members appointed by the Senate President Pro Tempore; and
• Four members appointed by the House Speaker.

Effort to Protect Franchise Model to Continue

Although NCRLA’s effort to protect the franchise model was included in a regulatory reform package that passed the House by a unanimous vote in mid-June, House and Senate negotiators failed to reach agreement on a comprehensive package of regulatory reforms in the waning days and hours of session. That left our proposal to protect the franchise model – and dozens of other regulatory reform measures – unfinished. (For an insider’s account of why “reg reform” negotiations fell apart on the last day of session, read Rep. Chuck McGrady’s blog post.)

NCRLA’s efforts to protect the franchise model will likely continue during the 2017 “long session,” when we will again seek legislation clarifying that, for employment-related claims under state law, a franchisor is not the employer of a franchisee or its employees. NCRLA and its allies in the business community are pushing this legislation in response to recent actions by the National Labor Relations Board (NLRB) seeking to expand the definition of “joint employer” in a way that threatens to undermine the franchise model that is key to the success of the hospitality industry – and many other sectors of the economy.



Limited Change to House Bill 2 Approved

Shortly before adjourning last week, the General Assembly approved limited changes to House Bill 2, restoring residents’ right to bring claims of discrimination in state courts. HB2, best known for requiring transgender people in government facilities to use bathrooms matching the gender on their birth certificates, also blocked a path that North Carolinians had to file state-court discrimination claims.

Some HB2 opponents said they would vote for the change even though they said it did not address discrimination against the LGBT community that they contend is at the center of the law. Efforts by Democrats to completely repeal House Bill 2 failed for the session. Read the News & Observer story. More from WRAL.

In a related development, the U.S. Justice Department is asking a federal judge to halt implementation of HB2. The federal agency sued the state over HB2 on May 9. Late Tuesday night, saying the law is causing ongoing damage to lesbian, gay, bisexual and transgender individuals, a team of Justice Department lawyers asked U.S. District Judge Thomas Schroeder to set aside the law. The motion for a preliminary injunction is the second filed against HB2. The American Civil Liberties Union sought a similar court order on May 16 as part of its own legal challenge against the state. Read the Charlotte Observer story.



Veteran Reporting Shifted from Businesses to Individual Veterans

In an effort that started last session and continued this year, a coalition of business groups including NCRLA has been successful in altering legislation that (in its original form) would have required corporations and LLCs to include in their annual reports the number of full-time North Carolina employees who are veterans. This would have imposed a significant new reporting requirement on North Carolina businesses that would have required burdensome changes in human resources systems.

Legislation that passed the General Assembly this year – Senate Bill 105 – no longer requires that corporations and LLCs include in their annual reports the number of full-time North Carolina employees who are veterans. Instead, if Governor McCrory signs the measure as expected, state income-tax forms will include a question about whether the filer is a veteran.

The state Division of Veterans Affairs is seeking better data on the number of veterans living and working in North Carolina to show that North Carolina values and supports its veterans, and to discourage the federal government from closing or scaling back military installations in the state (through the so called Base Re-alignment and Closure or BRAC process).


E-Verify Expansion is Dropped

NCRLA opposed legislation considered both last year and this year that would have expanded E-Verify requirements. Current law requires employers with 25 or more employees to use the federal E-Verify system. House Bill 1069, dubbed the 2016 NC Employee Protection Act, would have reduced that threshold to five or more employees and would also have remove an exception for employees who work less than nine months per year (although farm workers, independent contractors and domestic help would continue to be exempted). Although the legislation passed the House Regulatory Reform Committee, it never made it through the full house.

An even more controversial part of House Bill 1069 would have prevented law enforcement agencies from recognizing community-based or other non-state-issued identification cards. A law passed in 2015 banned local and state agencies from recognizing consular or community IDs. However, it made an exception for law enforcement because the state association of police chiefs protested, saying they need to be able to identify the people with whom they interact. House Bill 1069 would have repealed that exception.

Read the WRAL story.


Efforts to Raise Minimum Wage, Eliminate Tip Credit and Mandate Paid Sick Leave Fall Short

NCRLA opposed several bills this year that would have imposed new burdens on restaurants, hotels, and other businesses, including these:
• House Bill 1112 would have increased the state’s minimum wage and eliminated the tip credit in stages between now and 2020;
• House Bill 1046 would have amended the state constitution to raise the state minimum wage; and
• House Bill 1113 would have mandated paid sick leave for employees.


Major Victory in Credit Card Swipe Fee Case

We had a significant win last week when the Court of Appeals for the Second Circuit rejected the controversial settlement in "swipe fee" litigation against Visa and MasterCard. This has been a high-profile, high-priority case for the National Restaurant Association and other industry groups. NRA joined the class action in 2006 as the only named plaintiff representing the restaurant industry and vigorously opposing the initial settlement when it was unveiled in 2012. The court's ruling that the settlement was “unreasonable and inadequate” confirms what we already knew: a flawed settlement would not have accomplished our goal of changing a broken swipe-fee marketplace. The court's ruling sends the case back to lower court for further litigation.

Read NRA’s statement. Read more about the case in the Wall Street Journal.

The swipe-fee fight continues on the legislative front as well, where banks and card companies are waging an all-out war to undo the debit swipe-fee reforms that the industry achieved in 2010. We’re working our grassroots networks to generate calls, emails and contacts with House members. We oppose Financial Services Committee Chairman Jeb Hensarling's recently announced plan to undo 2010's debit-fee reforms for merchants as part of repealing the Dodd-Frank Act overall. We're also asking House members NOT to cosponsor a stand-alone bill by Rep. Randy Neugebauer to repeal the swipe-fee reforms.

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