The N.C. Department of Revenue didn't get what it wanted in the state budget when it comes to punishing businesses for hiding income.
The department wanted to be able to swing a hefty penalty at businesses that it determined were using out of state entities to hide revenue as a scheme to pay less in taxes.
The Senate's budget proposed eliminating the penalty. Supporters of that idea said the revenue department was overstepping its authority and unfairly punishing business. The penalties punish a well-intentioned company that had no way of knowing the department would disagree with its tax return years later, they say.
The solution that was included in the final state budget still allows the department to assess the penalties, but only after it first publishes a set of rules about how multi-state corporations should file their taxes. Critics of that provision say published rules would allow unscrupulous companies to craft new tax dodges. Supporters say it's a fair compromise.
"We can't scare people using the threat of penalties," said Rep. Pryor Gibson, a Wadesboro Democrat, who added that no one should try dodge the taxes they owe. "Everybody that owes tax needs to pay tax."
The department opposed the provision, but Gov. Bev Perdue supported it.
"The business community deserves to know what the rules are. It can't be case by case," she said last week.
The test on the provision will be in how much the revenue department is able to collect in disputes with multi-state corporations.