Lawmakers hold noses, OK corporate tax breaks
North Carolina legislators are split over whether the perks offered to job-creating businesses are too big, too small, or about right when unemployment is stubbornly high.
Among the last tasks Friday of this year's General Assembly session was approval of bills extending or expanding incentives for businesses. Tax breaks went to big technology companies that want to build electricity-hogging data centers, oyster shell recyclers, and film and television producers.
Late Friday, lawmakers unveiled a last-minute tax break — giving 15 years of special tax treatment for an unnamed company promising to invest $500 million in one of the poorest counties and announce it within the next two months.
The move was similar to the tax break offered Apple Inc. last year, which was estimated to save the technology company's $1 billion data warehouse about $46 million over a decade. Estimates were not available late Friday of how much North Carolina could give up in taxes from the unnamed company.
The measure passed the Senate 31-15 and the House 73-34.
"We're simply prostituting the state of North Carolina for these big corporations," Rep. Johnathan Rhyne, R-Lincoln.
Several lawmakers said they were holding their noses as they voted to increase inducements for companies willing to bring jobs to North Carolina, but did so because they feared employers would look elsewhere if they didn't.
"The way it is now, we're pawns for manufacturing. I don't blame them at all. The manufacturing company goes to the highest bidder," said Rep. Phillip Frye, R-Mitchell. Until all state and local governments quit competing by dangling dollars, "the only way we can be effective is to offer incentives."
By a 41-8 vote, the Senate tentatively approved a bill boosting tax breaks to a handful of unidentified companies targeted by state business recruiters. The measure earlier passed the House.
Final legislative action was expected early Saturday on the bill. It would give the incentives to an energy turbine manufacturer, a plant converting wood pulp to paper and at least two computer data centers.
Although the companies have not been publicly identified, state Commerce Secretary Keith Crisco this week said average consumers would recognize some of their names. The cost to the state of about $39 million in uncollected taxes over five years was modest compared to the 1,200 jobs and $2 billion in investments the companies would generate, business boosters said.
The Senate approved a wider-ranging bill that combines inducements totaling about $240 million over five years. The tax breaks range from companies that open in green-conscious industrial parks to companies that produce video games or simulators used in medicine and by the military.
The House tentatively approved the measure 72-35 on Friday, setting up a final vote on Saturday.
The biggest issue was how far North Carolina should go to subsidize a movie and television industry that has struggled as productions moved elsewhere.
Lawmakers discarded an earlier effort to let the salaries of highly paid actors and directors count toward a total tax break of up to $20 million. Movie producers could write off up to 25 percent of their in-state spending — up to $20 million — from their state taxes. The tax break is refundable, which means a producer who qualified for a $20 million writeoff but didn't owe that much in North Carolina taxes could collect the difference with a multi-million-dollar check from taxpayers.
Senate leader Marc Basnight, D-Dare, said Gov. Beverly Perdue told him she wanted more sweeteners for the film industry than those provided in the package.
So legislators worked late Friday before making tax-free any refund check producers collect from taxpayers.
Perdue spokeswoman Chrissy Pearson said the governor went to Hollywood earlier this year and was told the state needed to make its credits more generous if it wanted to be competitive with other film-making locales.
"This piece of legislation will get us a part of the way," Pearson said Friday. "It's an improvement over what we have now."
Basnight said lawmakers have tried during the session to provide Perdue with "the tools that she believes in general are necessary to recruit and compete for companies."
Associated Press Writer Gary D. Robertson contributed to this report.