PROPERTY TAX RELIEF PROGRAMS

PROPERTY TAX RELIEF PROGRAMS

S.L. 2009-574 Studies Bill Revenue Laws Study Committee authorized to study issues relating to the effects on local units of government of enacted property tax relief programs and exemptions 2

Property Tax Relief Programs Property tax homestead exclusion Disabled veteran property tax homestead exclusion Property tax homestead circuit breaker Present use value property Builders inventory property tax deferral 3

Property Tax Homestead Exclusion Amount excluded The greater of the first $25,000 or 50% of the appraised value of the permanent residence of a qualifying owner 4

Property Tax Homestead Exclusion Who is a qualifying owner? 1. Owner must be a North Carolina resident 2. Owner must be at least 65 years of age or totally and permanently disabled 3. Owner must have income for the preceding calendar year that does not exceed the income eligibility limit 5

Property Tax Homestead Exclusion Year Exclusion Income Limit 1972 $5,000 $ 3,500 1974 $ 5,000 1976 Added disability $ 7,500 1978 $7,500 $ 9,000 1982 $8,500 1986 $10,000 $ 10,000 1987 $12,000 $ 11,000 1994 $15,000 1997 $20,000 $ 15,000 2001 $20,00 or 50% value $ 18,000/indexed 2007 $25,000 or 50% $ 25,000/indexed 6

Disabled Veteran Homestead Exclusion What amount is excluded? The first $45,000 of appraised value of permanent residence 7

Disabled Veteran Homestead Who qualifies? Exclusion Veteran whose character of service at separation was honorable or under honorable conditions and who has a total and permanent service-connected disability or who received federal benefits for specially adapted housing 8

Disabled Veteran Homestead Who qualifies Exclusion A surviving spouse of either (1) a disabled veteran, (2) a veteran who died as a result of a serviceconnected condition whose character of service at separation was honorable or under honorable conditions, or (3) a service member who died from a service-connected condition in the line of duty and not as a result of willful misconduct. The surviving spouse must not have remarried 9

Disabled Veteran Homestead Exclusion How does a veteran show qualification? Veteran has received federal benefits to adapt housing, or Veteran has received certification by the U.S. Department of Veterans Affairs or another federal agency that the veteran has a service-connected, permanent, and total disability 10

Disabled Veteran Homestead Exclusion Prior to 2009, disabled veteran could exclude the first $38,000 in assessed value of housing if the veteran received federal benefits to adapt the housing for his or her special needs Federal benefit may not be more than 50% of cost of specially adapted housing up to a maximum of $50,000 (38 USC 2101) 11

Property Tax Homestead Circuit Breaker New program effective July 1, 2009 Defers property taxes owed on a permanent residence owned by an eligible taxpayer until a disqualifying event occurs Amount deferred based upon income of owner 12

Property Tax Homestead Circuit Breaker Who is a qualifying owner? 1. Owner must be a North Carolina resident 2. Owner must be at least 65 years of age or totally and permanently disabled 3. Owner must have owned the permanent residence for five consecutive years and occupied the residence for at least five years 4. Owner s income cannot exceed 150% of income eligibility limit for Property Tax Homestead Exclusion 13

Homestead Circuit Breaker What amount of property tax is deferred? If income for the previous year does not exceed the homestead income eligibility limit for current year, taxes are limited to 4% of the owner s income If income exceeds the income eligibility limit, but does not exceed 150% of the income eligibility limit, taxes are limited to 5% of the owner s income 14

Homestead Circuit Breaker 2009 income 2010 property taxes due < $27,100 4% of income $27,100 to $40,650 5% of income >$40,650 no relief 15

Homestead Circuit Breaker What are disqualifying events? Death of owner Transfer of property Owner ceases to use property as permanent residence Exceptions Transfers to co-owner or spouse and that person continues to occupy residence 16

Homestead Circuit Breaker When disqualifying event occurs, then the last three years of deferred taxes preceding the year that the disqualifying event occurs become due and payable, with interest, on the date of the disqualifying event 17

Homestead Circuit Breaker Unlike the homestead exclusion, the circuit breaker program requires an annual application If there are multiple owners, other than husband and wife, no circuit breaker is allowed unless all owners qualify and elect to defer taxes 18

Present Use Value Property Agricultural, horticultural and forestland Wildlife conservation land Working waterfront property 19

Present Use Value Property Agricultural, horticultural, and forestland Since 1974, farmland meeting certain ownership, size, and use requirements is appraised at PUV rather than market value under a PUV program Land must be in commercial production and under sound management program Disqualification results in deferred taxes for the preceding three years, with accrued interest, becoming due and payable. Taxes due and payable for the fiscal year that land becomes disqualified are computed at market value. 20

Present Use Value Property Agricultural land Actively engaged in commercial production of growing of crops, plants, or animals At least one 10-acre tract in production At least one tract that produced at least $1,000 average gross income over three preceding years

Present Use Value Property Horticultural land Actively engaged in commercial production of growing fruits, vegetables, nursery products, or floral products. At least one 5-acre tract in actual production At least one tract that produced average gross income of at least $1,000 over preceding three years

Present Use Value Property Forestland Actively engaged in commercial growing of trees At least one 20-acre tract in actual production No income requirement

Present Use Value Property Wildlife Conservation Land Effective July 1, 2010, wildlife conservation property will be appraised and taxed as if it were agricultural land Disqualification results in deferred taxes for the preceding three years with accrued interest becoming due and payable 24

Present Use Value Property Wildlife Conservation Land What are requirements for qualification? Use requirements Size requirements Ownership requirements 25

Present Use Value Property Wildlife Conservation Land Use requirements Land must be managed under a written wildlife habitat conservation agreement with the N.C. Wildlife Resources Commission (NCWRC) Owner must either (1) protect an animal species that lives on the land and that is on a N.C. protected animal list published by the NCWRC, or (2) conserve any one of the following priority animal wildlife habitats: Longleaf pine forest Early successional habitat Small wetland community Stream and riparian zone Rock outcrop Bat cave 26

Present Use Value Property Wildlife Conservation Land Size requirements Minimum size requirement The land must consist of at least 20 contiguous acres that meet the use requirements Maximum size requirement No more than 100 acres of an owner s land in a county may be classified as wildlife conservation land 27

Present Use Value Property Wildlife Conservation Land Ownership requirements Land must be owned by an individual, family business entity, or family trust Land must have been owned by the qualifying owner for the previous five years, except: When the land is owned by a family business or family trust, the land was owned by one or more members of the family business or family trust for the previous five years, or When the owner acquires wildlife conservation land and the owner continues to use the land as wildlife conservation land, and the new owner signs the existing wildlife agreement for the land within 60 days of acquiring the land 28

Present Use Value Property Wildlife Conservation Land Exceptions to payment of deferred taxes When owner of wildlife conservation land previously classified as agricultural does not transfer the land and the land again becomes classified as agricultural land When wildlife conservation land is transferred to owner who signs conservation agreement at time of transfer and continues to use land for wildlife conservation 29

Present Use Value Property Working Waterfront Property Effective July 1, 2009, working waterfront property is appraised and taxed at its present use value as opposed to market value Disqualification results in deferred taxes for the three previous years with accrued interest becoming due and payable

Present Use Value Property Working Waterfront Property What type of property qualifies? Any of the following property that has produced an average gross income of at least $1,000 for the most recent three years: 1. Pier that extends into coastal fishing waters and requires an access fee, or 2. Real property that is adjacent to coastal fishing waters and primarily used for a commercial fishing operation or fish processing

Builders Inventory Property Tax Deferral Effective July 1, 2010 until July 1, 2013, a licensed general contractor may defer taxes on an occupant-ready residence constructed and owned by contractor Deferred taxes become due at earliest of one of following disqualifying events: Builder transfers the residence Residence occupied by builder or person with builder s consent Five years from date property was subject to being listed for taxation by builder Three years from time property first received tax benefit 32

Helpful Websites North Carolina Department of Revenue Includes Present Use Value Program Guide and applications for property tax relief www.dornc.com