NC Senate Passes Bill Overhauling Vape Rules and R&D Tax Deductions

North Carolina Vape Ban Teen Vaping House Bill 900

The North Carolina Senate passed Senate Bill 595 , a sweeping revenue measure that overhauls vapor product enforcement and alters research and development tax deductions. The Republican-backed bill now heads to the House for a final vote amid sharp partisan debate over its corporate tax changes.

A primary focus of the legislation is tightening the regulatory framework surrounding alternative nicotine markets. By shifting enforcement of the vapor products registry to Alcohol Law Enforcement (ALE), lawmakers aim to streamline oversight. Additionally, the bill expands licensing requirements, forcing retailers to obtain specialized permits to sell non-vapor alternative nicotine products, such as nicotine pouches.

While the regulatory changes to nicotine products enjoy broad support, the bill’s tax provisions triggered intense debate. Democrats opposed the measure because it decouples state tax code from federal rules, preventing companies from fully deducting R&D expenses in the year they are incurred. Instead, businesses must spread these deductions over five years.

Policy AreaPrevious FrameworkNew Framework under SB 595
Vape Registry EnforcementDepartment of RevenueAlcohol Law Enforcement (ALE)
Nicotine Pouches & AlternativesStandard retail salesSpecialized retail license required
R&D Tax DeductionsImmediate, single-year write-offAmortized over five years

Critics warn the tax shift could penalize startups and stifle local innovation. However, Senate Republicans emphasized that the deduction remains intact and argued that other critical provisions in the bill – such as Hurricane Helene tax relief and protections against the financial exploitation of older adults – are too urgent to delay.

Matthew Ma
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