AN ACT to modify the income tax rate reduction trigger to Fund north carolina's future.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 105‑153.7 reads as rewritten:

§ 105‑153.7.  Individual income tax imposed.

(a)        Tax. – A tax is imposed for each taxable year on the North Carolina taxable income of every individual. The tax shall be levied, collected, and paid annually. Except as otherwise provided in subsection (a1) of this section, the tax is a percentage of the taxpayer's North Carolina taxable income computed as follows:

Taxable Years Beginning                   Tax

In 2022                                    4.99%

In 2023                                    4.75%

In 2024                                    4.5%

In 2025                                    4.25%

After 2025                               3.99%.4%.

(a1)      Rate Reduction Trigger. – Notwithstanding the tax rates set out in subsection (a) of this section, if total General Fund revenue in a fiscal year set out below exceeds the trigger amount indicated for that fiscal year, then the applicable tax rate for the indicated and subsequent tax years shall be equal to the greater of (i) the prior taxable year's rate decreased by one‑half percentage point (0.50%) or (ii) two and forty‑nine hundredths percent (2.49%). For purposes of this subsection, total General Fund revenue is the amount stated in the final accounting of total General Fund Reverting Net Tax and Non‑Tax Revenues for the fiscal year, as reported by the Office of State Controller in August following the end of the fiscal year.during a fiscal year the recommended Savings Reserve Balance under G.S. 143C‑4‑2(f) has been met, and if both the revenue adequacy trigger and the recession indicator trigger under G.S. 143C‑4‑12 have been met, then the applicable tax rate for that tax year and subsequent tax years shall be equal to the greater of (i) the prior taxable year's rate decreased by one‑quarter percentage point (0.25%) or (ii) two and forty‑nine hundredths percent (2.49%).

Fiscal Year                     Trigger Amount             Taxable Year Beginning

FY 2025‑2026                $33,042,000,000                         In 2027

FY 2026‑2027                $34,100,000,000                         In 2028

FY 2027‑2028                $34,760,000,000                         In 2029

FY 2028‑2029                $35,750,000,000                         In 2030

FY 2029‑2030                $36,510,000,000                         In 2031

FY 2030‑2031                $38,000,000,000                         In 2032

FY 2031‑2032                $38,500,000,000                         In 2033

FY 2032‑2033                $39,000,000,000                         In 2034

…

(c)        Report on the Calculation of the Rate Reduction Trigger. – Annually, the Office of State Budget and Management (OSBM) and the Fiscal Research Division (FRD) of the General Assembly shall jointly calculate the conditions necessary to trigger a rate reduction under subsection (a1) of this section. OSBM and FRD shall report the results of the calculations required by this subsection to the Department of Revenue and the chairs of the House and Senate Finance Committees no later than October 1 of each year.

SECTION 2.  Article 4 of Chapter 143C of the General Statutes is amended by adding a new section to read:

§ 143C‑4‑12.  Revenue adequacy and recession indicator triggers.

(a)        Revenue Adequacy Trigger. – The revenue adequacy trigger shall be met if the result obtained from the calculation outlined in subdivision (1) of this subsection is more than the result obtained from the calculation outlined in subdivision (2) of this subsection. The revenue adequacy trigger calculations are:

(1)        Estimated revenue if the tax rate in effect for the current fiscal year was reduced because of a rate reduction trigger pursuant to G.S. 105‑153.7.

(2)        Estimated revenue based upon the certified net General Fund appropriation for the current fiscal year, increased by (i) the consensus calculation for inflation of state government costs using the State and Local Government Consumption Price Index (SLG‑PI), (ii) population growth based on a combination of populations under age 23, and ages 23 and above, weighted to share of budget (sixty percent (60%) and forty percent (40%) respectively), as estimated by the State Demographer of the Office of Budget and Management, and (iii) funding increases or decreases necessary to comply with court orders, statutory appropriations, or anticipated cost savings. For any year in which the State is operating under a budget continuation pursuant to G.S. 143C‑5‑4, the revenue calculation under this subdivision shall be based on the certified net General Fund appropriation for the prior fiscal year.

(b)        Recession Indicator Trigger. – The recession indicator trigger shall be met if the result obtained from the calculation outlined in subdivision (1) of this subsection is less than one‑half percent (0.5%) higher than the result obtained from the calculation outlined in subdivision (2) of this subsection. The recession indicator trigger calculations are:

(1)        The combined average unemployment rate of the United States and North Carolina for the period from June to August of the current year, as published by the Bureau of Labor Statistics of the United States Department of Labor (BLS).

(2)        The combined average lowest quarterly unemployment rate for the United States and North Carolina for the prior fiscal year, as published by BLS.

SECTION 3.  This act is effective for taxable years beginning on or after January 1, 2025.