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Property Tax Resources

Jan
01

North Carolina Property Tax Updates

Updated September 2015

North Carolina

The North Carolina General Assembly has enacted legislation which exempts from property tax the increase in the value of real property held for sale by a builder. Effective for tax years beginning January 1, 2016, and applicable to improvements made after July 1, 2015, improvements to single family or duplex residential real property held for sale by builders and commercial real property held for sale by builders are excluded from taxation as long as the property is held for sale. Applications for exclusion must be filed annually.

Charles B. Neely, Jr.
Nancy S. Rendleman
Williams Mullen
American Property Tax Counsel (APTC)

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Sep
30

Charlotte Caught In A Web

Inequities in assessments spark tax controversy in North Carolina's banking hub.

Charlotte, the largest city in North Carolina, is the second largest banking center in the United States. Like the larger New York financial cluster, Charlotte suffered grievous job losses and deflation of property values during the Great Recession. As the seat of Mecklenburg County, Charlotte is also at the center of a tax reform effort marked by record numbers of taxpayer protests, the resignation of the tax assessor and an ongoing attempt by state lawmakers to correct local valuation inequities.

Essentially, the lengthy intervals up to eight years — that North Carolina law allows between revaluations, combined with the effects of deteriorating property values since the onset of the recession, set the stage for a valuation imbroglio for property owners in Charlotte and Mecklenburg County.

Prior to its 2011 revaluation, Mecklenburg had last revalued in 2003. The county planned at that time to revalue in 2007. During the course of the last cycle, however, county commissioners decided to postpone the revaluation until 2009. After the banking crisis and resulting real estate market crash of 2008, when real estate sales largely ceased, commissioners postponed the revaluation to 2010, and then postponed it again until 2011, the eighth year in the cycle, when by law the revaluation had to occur. Presumably, political leaders intended the postponements to allow the real estate market an opportunity to stabilize, and perhaps recover.

Those good intentions and the resulting series of postponements proved to be major contributors to what must be regarded as a blown revaluation, despite the best efforts of what has egnerally been regarded as a highly competent assessor and staff.

The assessments produced significant overvaluations of many properties and sparked mass protests from homeowners in sections of the county and a heated debate punctuated by the county assessor's resignation. Taxpayers had filed 1,542 appeals to the North Carolina Property Tax Commission from the Mecklenburg County Board of Equalization and Review as of mid-April this year, the largest number by far from any revaluation in North Carolina's history.

Pearson's Appraisal Service, an outside consultant the county hired to study the revaluation, reviewed a random sample of the revaluation results and discovered major issues. Although much of the revaluation met acceptable assessment standards, the consultant identified inconsistencies involving both uniformity of assessment and valuation in residential neighborhoods which were heterogeneous with in-fill and tear-down activity and in neighborhoods where the current use might not be the highest and best use.

Problems also emerged in connection with commercial properties, including certain office, retail and hotel categories. Substantial problems turned up involving land valuations in addition to many other issues that the consultant characterized
as minor.

Although the county commissioners voted to expand the consultant's study, they were constrained by a state law that prohibits retroactive valuation adjustments and taxpayer refunds for years when assessments had not previously been appealed. Amid continuing and widespread voter dissatisfaction, legislators, with the support of the county commission, introduced unprecedented legislation on March 4, 2013, to correct the 2011 revaluation.

North Carolina's constitution prohibits classifications of property for taxation except on a statewide basis, and provides that "every classification shall be made by general law uniformly applicable in every county, city and town, and other unit of local government." Another section of the constitution prohibits local legislation extending the time for the levy or collection of taxes.

Attempting to draft constitutional legislation that would address Mecklenburg County's unique revaluation needs, lawmakers worded Senate Bill 159 and its House counterpart, HB 200, to be ostensibly applicable statewide, but with preconditions to application of the statute that only Mecklenburg County is likely to meet.

The North Carolina Senate passed SB 159 unanimously on March 28, and after amendment in the House, the bill was returned to the Senate, which concurred in the House amendments on July 18. SB 159 provides that the county must conduct a general reappraisal within 18 months if the following is found to exist:

  • The county has evidence that the majority of commercial neighborhoods possess significant issues of inequity
  • Instances of inequity or erroneous data had a significant impact on the valuation of residential neighborhoods,
  • The county's last general reappraisal was performed in 20082012 when the economic downturn most severely affected home prices,
  • The county's evidence resulted from a review by an appraisal service retained by the county and resulted from a sample size of not less than 375 properties that were examined on site.
  • The reappraisal is to be applicable to all tax years from and including the year of last revaluation,
  • Alternatively, a county meeting the criteria must have a qualified appraisal service conduct a total review of all the values in the county and make recommendations as to true values of the
  • properties as of Jan. 1 of the last general revaluation.

Once in possession of this information, the county would be required under SB 159 to correct incorrect assessments to reflect true value as of Jan. 1, 2011, and apply those corrected values for later years in the revaluation cycle. Refunds would be automatically made, with interest, and under-assessments based on the new values would be subject to discovery assessments under existing tax statutes, but without being subject to normal discovery penalties.

Based on the legislative action, it appears that the Mecklenburg revaluation will drag on for some time. Since the county will be reviewing values, the legislation appears to open the door for taxpayers to identify assessments they think unfair and draw them to the attention of the county for review. And as the legislative note accompanying the bill provides, "a taxpayer or county may have standing to challenge" the legislation and "it is unknown whether a court would find the bill to be local in nature or non-uniform."

In other words, lawmakers recognize the potential for a court to rule the legislation as unconstitutional.

Neely Chuck Neely, Jr. is a partner in the law firm of Williams & Mullen, the North Carolina member of American Property Tax Counsel (APTC), the national affiliation of property tax attorneys. Mr. Neely can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

May
05

A Growing Dilemma Over Tax Abatements

"States struggle to keep economic development incentives viable amid budget tightening...."

By Darlene Sullivan, Esq., CMI., as published by National Real Estate Investor, May 2011

Policy makers have long used property tax abatements and incentives to draw investment, rehabilitation and other economic development to particular locations. While the economic effects of abatements and incentives are typically positive, officials facing budget deficits at state and local levels have begun to look for ways to hold onto more of their potential tax revenues while still enticing new business and development.

It is a difficult balancing act for lawmakers, and the changes they seek vary by state. For property owners and developers considering construction, expansion, or renovation of a new facility, now is the time to study any proposed changes to incentive rules and to ensure compliance with existing incentive agreements.

In Texas, state legislators are considering revisions to several economic development incentives the state has successfully used to attract new companies. Lee Higgins, president of Austin-based Business Economic Incentives LLC, fears that a major overhaul of business incentives offered by the state would slow economic growth in the state.

DSullican_graph

Smaller steps

To counterbalance a potential slowdown in economic growth in North Carolina, state officials are working to find ways to support projects that would not have qualified for state or local government support before the economic downturn.

For instance, in better times, companies typically would have to create 50 to 100 jobs and commit to invest $2 million to $5 million in capital expenditures before a state or local agency would show much interest in supporting a project.

Now, a company can create as few as 20 new jobs and spend less than $1 million on capital improvements and still gain the support of local government.

In addition, economic development officials in North Carolina have shown flexibility and a willingness to discuss support for projects that entice existing employers to remain in the region, especially as companies are in the process of consolidating operations across the U.S.

In North Carolina, Gov. Bev Purdue schedules public announcements when companies add as few as 15 new jobs to show her commitment to economic development, says Craig Fisher, managing member in the Charlotte, N.C. office of Tax Incentives Consultants LLC.

Many state and local economic development officials are working with companies struggling to meet job creation numbers agreed to before the slump.

Flexible programs

In the Northeast, the economic downturn has limited the amount of incentives that states can offer, but government officials have been granted freedom to exercise more creativity with programs that promote economic development.

In Massachusetts, the Economic Development Incentive Program offers a negotiated state investment tax credit and municipal tax increment financing. Once highly utilized, the program has been capped at $25 million annually as of Jan. 1, 2010.

Massachusetts has increased flexibility for the investment tax credit to equal as much as 10% of construction and start-up costs for projects in locations designated for economic development. In areas of Massachusetts not designated as economic target areas, a project that creates 100 or more jobs also is eligible to receive a 10% investment tax credit.

Scot Butcher, managing member in the Boston office of Tax Incentives Consultants LLC, says the tax credit amount may be taken as credit against future taxes or collected as a refund. The tax credit can run as high as 40% for some manufacturing projects.

The trends in Texas, Massachusetts and North Carolina signify that tax abatements and incentives are still available to property owners. To take advantage of abatement laws in their region, owners need to understand the laws governing them and stay abreast of the changes that have occurred in these laws.

DarleneSullivan140

Darlene Sullivan is a partner with the Austin law firm of Popp, Gray & Hutcheson LLP, the Texas member of the American Property Tax Counsel (APTC). She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

American Property Tax Counsel

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