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City concerned about business tax changes

The city of Charlotte is wary of a proposal working through the General Assembly that would revamp the Business Privilege License Tax, which provides the city with about $17 million a year.

Legislators have discussed in the past scrapping the tax completely, which the city has adamantly opposed.

A bipartisan legislative committee has recently endorsed changes to the tax, which would include expanding it to more businesses, such as doctors, banks and lawyers. But the committee would also cap the amount paid for each business location to $100.

In Charlotte, the Business Privilege License Tax is capped at $10,000 per business. The minimum is $50 per business location. It is generally tallied at 60 cents for each $1,000 of revenue a business generates.

The General Assembly hasn’t voted on changing the tax, though legislators could consider it in the short session in May.

City Manager Ron Carlee declined to comment on the proposals, saying the city needed to evaluate how they would impact the city.

Other staff members have also declined to comment.

Mayor Dan Clodfelter, a former state Senator who had chaired the Senate Finance Committee, has long supported reforming the tax.

“I can’t run away from where I have been for 15 years,” he said Wednesday. “The tax is archaic and complex. There needs to be a revision.”

However, Clodfelter said that any change to the tax would have to be “revenue-neutral,” which means it would generate the same amount of money as before.

“I’m not sure current proposal is quite there,” Clodfelter said, noting that the city would likely lose some money under the changes.

He said the city doesn’t yet know how much money it could lose. He said any changes to the tax would likely start in the summer of 2015, which wouldn’t impact Charlotte’s upcoming budget discussions for the next fiscal year.

Carlee has said he doesn’t expect to recommend any property tax increase this year. He will present his budget to council members next week.

Charlotte’s general fund budget for the upcoming fiscal year is expected to be about $580 million. The business privilege tax comprises about 3 percent of that amount.

The general fund pays for police, fire, roads and other basic city services like planning and zoning and code enforcement.

In the past, the city has said it could make up for a loss of that tax revenue through service cuts or property taxes or a combination of both.

The N.C. League of Municipalities has estimated the changes being considered would cost the state’s municipalities about $25 million.

A 2012 study by the N.C. School of Government estimated cities and towns collected $62 million annually from the tax.

That study showed that Charlotte would be, by far, the city most impacted by the tax. Charlotte collected just under $17 million from the tax in 2012. Raleigh’s business tax receipts were next largest, at $7.6 million.

Chris Nida of the N.C. League of Municipalities said the organization voted last year in favor of reforming the tax, but wanted it preserved.

“We are hoping to have the opportunity to negotiate further,” Nida said.

The tax’s complexity ensnared former Mayor Patrick Cannon, who was arrested on federal corruption charges March 26. Cannon’s business, E-Z Parking, hasn’t properly paid the tax on each parking lot or deck that it managed.

After the Observer revealed the tax problems, E-Z Parking said it didn’t understand it was supposed to pay the tax on each lot that it managed.

Harrison: 704-358-5160
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