Senate adds $4 million tax cut for Reynolds American

Published May 16, 2019


Cigarette maker Reynolds American would get a $4 million tax cut from language added Wednesday to a broader tax bill moving through the Senate.

The change would protect Reynolds, and potentially other businesses with complex holding company structures, from some double taxation baked into the state's franchise tax, Sen. Paul Newton, R-Cabarrus, said.

"We never intended for the franchise tax to happen twice," Newton said.

Senate Bill 622 rolls back North Carolina's franchise tax over the next two years, giving businesses across the state a tax cut worth about $250 million a year. It also increases the standard deduction a bit, cutting state personal income taxes, boosts internet sales tax collections and tinkers with a number of other sections of the state's tax code.

It's a major tax bill with support in both the House and the Senate, but which Gov. Roy Cooper's office has said he opposes.

Legislators dropped in language Wednesday that adds to the state's definition of a holding company.

The franchise tax is a tax on a business' net worth, and it's applied differently to various types of companies, including holding companies.

The new language doesn't mention Reynolds American by name, but Newton said it was written to address an issue that, as far as he knows, only Reynolds has had.

"If there are others out there, we want to know about it, because it's not our intention," said Newton, one of Senate Bill 622's lead sponsors.

The issue apparently stems from the corporate structure that resulted from Reynolds' 2015 purchase of Lorillard Tobacco, and British American Tobacco's 2017 purchase of Reynolds American.

The bill will be on the Senate floor Thursday.

Update: Reynolds American spokeswoman Kaelan Hollon sent this statement to WRAL News Thursday:

“A technical quirk in North Carolina tax law caused R.J. Reynolds Tobacco Company and other similar companies to be taxed twice on the same property. We’ve been transparent and open in seeking to fix this flaw in the tax code and we appreciate the legislators, Department of Revenue staff and non-partisan tax staff who collectively agreed that paying tax twice on the same property was not the intent of the law and worked to draft this fix. We look forward to continued collaboration that may help improve the North Carolina business environment.”