May 07 2020

On May 4, 2020, North Carolina Governor Roy Cooper signed into law two bills providing important COVID-19 relief to North Carolinians, after the North Carolina General Assembly passed the bills unanimously. The relief package directs the spending of approximately $1.6 billion in federal funding and outlines important regulatory and policy changes to support North Carolinians facing challenges related to COVID-19. 

Spending Relief Package 

House Bill 1043 contains the spending package, which allocates federal funding from the CARES Act, including support to small businesses. The legislation allocates $125 million to fund small business loans administered by the Golden LEAF Foundation and its lending partners. These funds will be available in loans of $50,000 or less to businesses with a physical presence in North Carolina that can show economic losses as a result of COVID-19.  The legislation gives priority to businesses that had 100 or fewer full-time equivalent employees as of the date of North Carolina’s Emergency Declaration (Executive Order No. 116, issued March 10, 2020 by Governor Roy Cooper) (the “NC Emergency Declaration”).  The Golden LEAF Foundation and its lending partners will determine the specific terms of the loans as the program rolls out, but the legislation requires an interest rate of 4% or less until a “triggering event” (which occurs 6 months from the date of the loan, at the longest).  Following the triggering event, the interest rate must be at least 5.5%.  The maximum term for the loans is 66 months. 

Loan proceeds may be used to pay employee compensation, mortgage, rent, utilities and other operating costs and expenses incurred on behalf of a business located in North Carolina.  Loans will be secured and must be repaid with any federal funds received by the business representing a duplication of benefits.  Importantly, the loans will not convert to grants.

This allocation supplements the NC COVID-19 Rapid Recovery Loan Program, which was a prior $15 million loan program administered by the Golden LEAF Foundation, that was exhausted on March 23, 2020 due to high demand. 

Regulatory and Policy Relief Package 

Senate Bill 704 provides certain regulatory relief and governmental policy changes in response to COVID-19 related to (a) tax/unemployment relief, (b) education, (c) healthcare and (d) continuity of state government. The tax relief and continuity of state government provisions highlighted below may impact individuals and businesses operating in North Carolina. 

  • Tax Relief Provisions

The legislation extends the usual April 15 corporate franchise, corporate income and individual (including partnership and estate) income tax return filing dates, and corresponding estimated tax payment dates, until July 15, 2020.  It also suspends the usual rule requiring interest accrual for late payment during this period.  The statute of limitations for filing refunds of such taxes is similarly extended for this period; presumably, as a matter of symmetry, no refund interest will accrue during this period, though not addressed by the legislation.  Various administrative appeal deadlines are similarly extended for this period. 

The legislation also addresses unemployment benefits and taxes, codifying the Governor Roy Cooper’s executive order regarding unemployment benefit guidelines, and implementing an unemployment tax credit.  The usual one-week waiting period and job-seeking requirements are waived for unemployment claims related to COVID-19 or a medically- or governmentally-mandated quarantine.  Further, an employing business is allowed a tax credit against the business’ contributions to the unemployment insurance fund otherwise due for the July 2020 filing period.  The tax credit is equal to the contributions payable on the reports filed for the April 2020 filing period, and any amount by which the April 2020 filing period contributions exceed the July 2020 filing period contribution amounts will be refunded. 

  • Continuity of State Government Provisions

The legislation also provided some temporary relief from certain North Carolina state statutes to aid with the flow of normal state commerce and legal functions in the midst of the COVID-19 crisis, including the items described below: 

1. Emergency Video Notarization 

Emergency Video Notarization permits a North Carolina notary to notarize a document via video conference until 12:01AM on August 1, 2020. The video conference technology must satisfy the following requirements: 

  • Occur in real time and allow direct, simultaneous interaction between the principal seeking the notary’s services and the notary;
  • Have audio and video of sufficient quality so that each participant may be clearly seen, identified and understood; and
  • Be capable of being recorded by certain means.

The requirement that a principal must appear personally before a notary is satisfied if:

  • The notary is physically present in North Carolina;
  • The principal verifies to the notary that he or she is physically present in North Carolina, and indicates the county where he or she is located; and
  • The principal and notary use video conference technology satisfying the criteria above.

Verification of the principal may be done solely by video conference if the notary has personal knowledge of the principal. If the notary does not have personal knowledge of the principal, the principal must present certain documentation to the notary.

The notary must observe the principal sign each document to be notarized – the principal must verbally state the documents being signed. Following execution, the principal must:

  • If original “wet-ink” signatures are not required, send a copy of the signed document to the notary by either fax or electronic means on the day signed. The notary must notarize the document on the same day it is received, and then send by physical delivery, fax or other electronic means on the same day the notary signed the document; or 
  • If an original “wet-ink” notarization on an original “wet-ink” signed document is required, send a copy of the signed document to the notary by either fax or electronic means on the day signed and also deliver the original signed document to the notary by mail or other physical method. The notary must compare the original with the electronic document to determine they are the same, and then notarize the “wet-ink” signature on the original and date the notarization as of the date the execution was observed using video conference technology. Finally, the notary must promptly transmit the original “wet-ink” notarized document to the principal by mail or other physical delivery.

The acknowledgement to the notarization must include:

  • The counties in which the notary and the principal were located during the notarization; and
  • The following statement: “I signed this notarial certificate on _________ (Date) according to the emergency video notarization requirements contained in N.C.G.S. 10B-25.”

The notary must record certain information about the notarization in a notary journal. Such notary journal must be kept confidential and retained by the notary for at least ten years, but may be retained electronically.

2. Emergency Video Witnessing

  • Until August 1, 2020, any person who witnesses the signature of a record through video conference technology allowing for direct, real-time audio video interaction will be considered an “in-person” witness and such record will be considered executed by the principal signer “in the presence of” such witness.
  • An attesting witness to a record will be considered to have signed such record in the presence of the principal signer if (i) the principal signer’s signature is witnessed in accordance with the bullet above; and (ii) the attesting witness immediately signs such record while the video conference technology still allows for direct, real-time audio and video interaction between the principal signer and the attesting witness.
  • Records witnessed in this manner must contain (i) a “conspicuous” statement indicating that the record was witnessed by one or more witnesses physically located in North Carolina, and in which counties; and (ii) the county where the principal signer was located. Such records may be signed in counterparts, unless the record in question expressly prohibits it.

3. Residential Real Estate Closings 

  • The legislation temporarily modifies the Good Funds Settlement Act to allow a settlement agent in a residential real estate transaction to disburse closing funds from its trust or escrow account prior to recordation of deeds, deeds of trust or other required loan documents (collectively, “Deeds”). 
  • The settlement agent must record the Deeds (and then immediately notify all parties) within three business days of the earlier of (i) the date the register of deeds re-opens or (ii) the date the register of deeds begins accepting documents for electronic recording. The settlement agent must hold all Deeds in a fiduciary capacity until recordation. 
  • However, such provisions are only effective under certain circumstances, including that the (i) applicable register of deeds is located within the statutory emergency area, is closed to the public as a result of the NC Emergency Declaration and does not accept documents for recording by any method (including electronic recording); (ii) the lender’s closing instructions authorize disbursement prior to recording; (iii) all parties agree to certain requirements in writing and waive certain risks; and (iv) the settlement agent complies with certain requirements, including securing a title policy (with indemnity coverage) for the gap period between disbursement and recordation.
  • Such provisions expire upon the earliest of (i) the date the register of deeds re-opens; (ii) the date the register of deeds begins accepting documents for electronic recording; or (iii) August 1, 2020.

4. Limited Business Civil Immunity 

  • The legislation provides civil liability immunity to (i) essential businesses (as defined in the legislation) with respect to claims from any of its customers or employees for any injuries or death caused in connection with the contraction of COVID-19 and (ii) emergency response entities (as defined in the legislation) with respect to claims from any of its customers, users or consumers for any injuries or death caused as a result of the COVID-19 pandemic. However, immunity shall not apply if the gross negligence, reckless misconduct or intentional infliction of harm of the essential business or emergency response entity caused the injury or death.
  • The immunity provided to emergency response entities should be applied in a more extensive manner, given it protects from the entirety of the COVID-19 pandemic rather than exclusively from the contraction of COVID-19 (as applied to essential businesses).
  • The legislation does not preclude employees of an essential business or emergency response entity from seeking any remedies under North Carolina’s Workers’ Compensation Act for any injuries or death caused in connection with the contraction of COVID-19 while employed. 
  • The immunity applies to claims filed on or after March 27, 2020, and expires when the NC Emergency Declaration is rescinded or expires.

5. Other Provisions

  • Health Care Power of Attorney: Until the earlier of (i) 12:01AM on August 1, 2020 or (ii) the termination of the state of emergency declared in the NC Emergency Declaration, a healthcare power of attorney is not required to be executed in the presence of two witnesses; provided that such instrument is signed by the principal, properly acknowledged before a notary, and otherwise executed in compliance with North Carolina law. Health care powers of attorney must contain a “short and plain” statement indicating that the instrument was executed in accordance with the new law.
  • State Agency Flexibility: The legislation provides most state agencies with temporary, additional regulatory flexibility to respond to the impacts of COVID-19 when in the public interest, such as (i) delaying the collection, or modifying the method of the collection, of fees, fines or late payments; (ii) delaying renewal dates for permits, licenses and other similar governmental registrations; and (iii) delaying or modifying educational or examination requirements implemented by such state agencies. 
  • Chapter 160D Deadline Extension: Chapter 160D is the comprehensive rewrite of the planning and zoning statutes in North Carolina set to become effective January 1, 2021. Section 4.33 of the new legislation extends the effective date of Chapter 160D until August 1, 2021.
  • Permit Extension: Section 4.40 of the new legislation grants permit extensions for certain local government approvals related to development.
     

Links to the full text of the new legislation: