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Bill Summary · SB 1016

Summary of SB 1016 (2025 Session) — Fair Share for Public Schools Act

Note: Filed in NC Senate on April 30, 2026. Primary sponsors: Senators Chitlik and Garrett; co-sponsor Sophia Chitlik, Michael Garrett.

1) Purpose and Intention

  • Establishes a new 7% income tax rate on North Carolina taxable income that exceeds $1,000,000.
  • Requires that the revenue raised from this high-income tax be dedicated to the State Public School Fund and allocated to local school administrative units on a per-pupil basis, for use in funding public schools.
  • Aims to provide additional resources for public education by taxing high-income earners above the $1 million threshold.

2) Key Provisions and Changes

Tax Structure

  • Amends G.S. 105-153.7 (Individual income tax imposed).
  • Creates a High-Income Tax Rate:
    • Taxable income > $1,000,000 is taxed at 7%.
    • This 7% rate applies to the portion of income above $1,000,000 (i.e., a bracket specifically for high earners).
    • The higher-rate bracket does not participate in any rate reduction triggers that would apply to other parts of the income tax schedule.

Revenue Use

  • Annually, the Secretary of Revenue must distribute the taxes collected under the 7% high-income bracket, after deducting the Department of Revenue’s administrative expenses.
  • Yearly distribution is to the State Public School Fund.
  • Allocation is for allotment by the State Board of Education, on behalf of counties, to local school administrative units (SAUs) on a per-pupil basis.
  • The distribution is consistent with Article IX, Section 7(b) of the North Carolina Constitution (i.e., funding public schools on a per-pupil basis).
  • The Secretary may retain up to $100,000 per year to reimburse the Department of Revenue for its cost of collection.

Administrative Details

  • The cost of collection deduction is limited to $100,000 annually.
  • The act specifies that the 7% high-income tax rate is not subject to any rate reduction trigger that might otherwise apply to other tax rates (i.e., the high-income bracket remains at 7%).

3) Who/What Is Affected

Taxpayers

  • Individuals with North Carolina taxable income exceeding $1,000,000 in a tax year are subject to a 7% tax rate on the amount over $1,000,000.
  • All other NC individual income taxpayers remain subject to the existing tax rate structure (with this bill adding only the high-income bracket).

Funds and Programs

  • State Public School Fund receives the additional revenue from the 7% tax on income above $1 million.
  • Local school administrative units (SAUs) receive funding allocations on a per-pupil basis, as determined by the State Board of Education using this dedicated funding pool.
  • Department of Revenue administers collection and incurs administrative costs (capped at $100,000 per year).

4) Procedural and Timeline Aspects

  • Effective Date: Taxable years beginning on or after January 1, 2026.
  • Tax-year year 2026 onward would be the first year the 7% high-income tax rate could apply (if income exceeds $1 million in a given year).
  • Annual distributions to the State Public School Fund would occur each year, based on the taxes collected under the high-income bracket, after administrative costs.

5) Notes and Considerations

  • The bill explicitly dedicates high-income tax revenue to public education, aligning with a “fair share” concept for funding schools.
  • The per-pupil allocation mechanism depends on the State Board of Education and constitutional provisions, implying a structured approach to distributing funds to SAUs.
  • The administration cost cap helps limit overhead for implementing the new tax.

If you’d like, I can provide a comparison with current NC tax law or project potential revenue ranges based on different income distribution assumptions.

Compiled from official sources — confirm details with the bill’s official record.

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