NC Senate passes expansive revenue bill changing vape enforcement, R&D tax breaks

Senate Republicans passed a long-in-the-making revenue bill on Thursday despite controversy that it walks back a Trump administration research and development tax break. It now heads to the House for a final vote.

“The long saga of this bill is hopefully coming to an end,” said Sen. Buck Newton (R-Wilson), who presented the resolution Thursday. “The majority of the provisions I want to talk about have already passed this body unanimously in the last session.”

Much of Senate Bill 595 is broadly popular among members of both parties. It includes provisions intended to provide financial institutions with the tools to intervene when they believe older or disabled adults are being targeted with financial exploitation. It also extends interest waivers and tax credits relating to Hurricane Helene.

Additionally, the bill shifts enforcement of the vapor products registry from the Department of Revenue to Alcohol Law Enforcement. And it requires retailers to obtain a special license to sell alternative nicotine products — such as the rapidly growing segment of nicotine pouches — not just vapor products.

NC legislators report state budget progress

Sen. Jay Chaudhuri (D-Wake) urged his caucus to vote against the bill because it bars companies from fully deducting research and development costs the year those expenses are incurred, decoupling from a change set forth in the One Big Beautiful Bill Act. The deduction would instead be spread out across five years. He warned that start-ups may avoid North Carolina over taxation of “phantom income.”

“You’re depleting the resources these companies need to invest in their next hire, their next breakthrough, their next contribution to the North Carolina economy,” Chaudhuri said. “It punishes innovation, kills jobs.”

Sen. Tom McInnis (R-Moore) stressed that the deduction is still intact, even if it is spread over a five-year period. He said there may be opportunities to reevaluate the research and development change going forward, but the other facets of the bill are too important to delay it any further.

Ultimately, all Republicans present voted in favor of the bill and all Democrats present voted against it.

The Senate also passed an alcohol omnibus bill Thursday that is more limited than a separate proposal advancing through the House. It is unclear whether the House will take the Senate’s version up.

All Democrats joined most Republicans to pass those alcohol regulatory reforms, though six Republicans voted against the bill, including Sen. Warren Daniel (R-Burke), who chairs the Senate Judiciary committee.