Session Law 2023-59: An Act to Increase Compliance by Counties and Municipalities That Fail to Timely Submit an Annual Audit Report
Session Law 2023-59 Notification and Appeal Timeline
North Carolina Session Law 2023-59, An Act to Increase Compliance by Counties and Municipalities That Fail to Timely Submit an Annual Audit Report, was enacted in June 2023 and applies to audits for fiscal years ending on or after June 30, 2023. The following sections provide information on the law and its implementation. Please see the law in its entirety here – SL 2023-59
| April 1 | Date by which counties and municipalities must submit their prior fiscal year audit to avoid issuance of a notice. |
| By April 30 | LGC staff will provide a notice to all counties and municipalities that have not submitted an audit as of April 1. The law requires mailing notifications to the unit’s primary mailing address within 30 days; LGC staff will also make other efforts to ensure delivery and receipt of notices, including emailing the notifications to units. |
| After Notification | Counties and municipalities receiving a notice may appeal a potential LGC action. See the “Appealing a Notice of Noncompliance” section below for details. Late Audit Notifications – Responses and Appeals Form |
| July 1 | Date after which counties and municipalities that have not submitted a prior fiscal year audit may be subject to withholding of a portion of sales tax distributions. Withholding of sales tax is not automatic; the LGC must act to initiate a withholding and units have the option to appeal the action both before and after a withholding is initiated. |
NOTE:
- There is no automatic withholding of sales tax distributions.
- The LGC must take action to initiate withholding.
- Units will be able to appeal the action before and after it is initiated.
- Please see SL 2023-59 and the LGC’s Resolution Establishing Guidelines for Successful Appeal of Sales Tax Withholding Pursuant To Session Law 2023-59 for more information.
Questions on notices, appeals, and other topics related to SL 2023-59 should be directed to LGCNotifications@nctreasurer.com
Session Law 2023-59 Other Resources and Information
A summary of the law follows; please be sure to read the law in its entirety here – SL 2023-59.
- Requires the LGC to provide a notice of noncompliance to all counties and municipalities that have not submitted an audit report within 9 months of fiscal year end. (G.S. 159-34(e))
- Allows counties and municipalities to appeal the LGC action to withhold a portion of sales tax distribution if the audit is not submitted within 12 months of fiscal year end. (G.S. 159-34(f))
- Allows the LGC to provide notice to the Department of Revenue to withhold a portion of a county or municipality’s sales tax distribution if the entity has not submitted an audit report within 12 months of fiscal year end and either the action was not appealed by the local government, or the appeal was not successful. (G.S. 159-34(f) and (g))
- Requires the LGC to establish and make available guidelines outlining specific criteria and circumstances that would warrant a successful appeal. (G.S. 159-34(f)) (see the “Appealing a Notice of Noncompliance” section below)
- The LGC must delay withholding if it determines the local government has provided sufficient evidence that the failure to submit an audit report is due to circumstances within the established guidelines. (G.S. 159-34(f))
Counties and municipalities that receive a notice of noncompliance pursuant to SL 2023-59 may confirm receipt of notice or appeal the potential LGC action by using the form below. Appeals should not be emailed.
Late Audit Notifications – Responses and Appeals Form
Appealing a Notice: Guideline for Successful Appeal
If a unit is appealing the action based on the Guideline for Successful Appeal adopted by the Commission, the unit should indicate so on its appeal submission in the portal. No additional written appeal is required; the unit will simply indicate that its appeal is based on the guideline. LGC staff will then confirm that the unit meets the criteria of the guideline and send confirmation of the appeal to the unit. The LGC may waive the requirement for the unit to appear before the Commission.
Appealing a Notice: Other Appeals
If a unit cannot base an appeal on the Guideline for Successful Appeal adopted by the Commission, a written appeal “based on other good cause with evidence to support the basis for the appeal” should be submitted through the portal. LGC staff will provide the appeals to the Commission for their review and consideration. Units will be scheduled to appear before the Commission on a schedule established by the Commission and staff.
Session Law 2023-59 modified G.S. 159-34 to require the LGC to establish and make available guidelines outlining specific criteria and circumstances that would warrant a successful appeal. (G.S. 159-34(f)). The LGC adopted a resolution establishing a guideline for successful appeal and providing other guidance at its December 5, 2023 meeting. A summary of the resolution follows; please be sure to read the resolution in its entirety here –Resolution Establishing Guidelines for Successful Appeal of Sales Tax Withholding Pursuant to Session Law 2023-59.
- The Commission shall deem an appeal successful if a county or municipality states as the basis for appeal that the county or municipality has submitted all annual audit reports within 12 months of fiscal year end for each of the prior five fiscal years to the Secretary as required pursuant to G.S. 159-34(a) other than the audit for which the non-compliance notice was issued.
- A county or municipality that cannot successfully appeal the Commission’s action based on the guideline may submit an appeal based on other good cause with evidence to support the basis for the appeal.
- The Commission retains the discretion to direct or delay withholding portions of sales tax distributions of counties and municipalities that have failed to submit an appeal or are unable to successfully appeal the Commission’s action under the guideline established.