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Bill Summary · HB 1164

Summary of North Carolina HB 1164 (Session 2025)

Title: Insufficient Funds for Taxes Penalty Modification

Sponsor: Representative Rubin (co-sponsors: Budd, Roberson, Logan)

Jurisdiction: North Carolina

Status: Filed April 30, 2026

Purpose
- To modify the penalty imposed for paying taxes with funds that are insufficient or non-existent.
- The bill aims to reduce the punitive nature of the current penalty, aligning it more closely with actual administrative costs incurred by counties for processing returned payments.

Key Provisions

1) Clarification and Modification of Penalty for NSF Payments (G.S. 105-357(b))
- Current law: If a tax payment (check or electronic funds transfer) is returned/unpaid due to insufficient funds or nonexistence of an account, the penalty is the greater of $25 or 10% of the payment amount, up to a $1,000 maximum.
- Proposed change:
- The text of the bill indicates modification of the penalty calculation, with a view toward preventing excessively high penalties on large tax bills.
- Specific alternative penalty formulas or thresholds are embedded in the proposed revision to the statute, but exact new figures (beyond intent) require reading the full amended language. The bill maintains that the penalty is in addition to interest and any criminal penalties, and that it applies to insufficient funds cases.

2) Procedures for Checks and Electronic Payments (G.S. 105-357(b) text excerpt)
- The bill reaffirms that tax collectors may accept checks and electronic payments; acceptance is at the tax collector’s own risk.
- Tax collectors may add a fee to electronic payment transactions to offset service charges.
- If a check/electronic payment is dishonored, the taxes are deemed unpaid, and corrected records must be issued with notice to the taxpayer. Collections proceed by normal remedies or civil action.
- Financial institutions that process tax payments must notify the tax collector if a check is honored or dishonored; upon dishonor, the tax collection process proceeds accordingly.

3) Administrative and Notice Provisions
- If the payment is dishonored, the tax collector must correct records to reflect nonpayment and provide written notice (certified/registered mail) to the recipient to return the tax receipt.
- The tax collector may pursue collection through existing remedies or civil action on the check/electronic payment.

4) Funding for Education and Outreach (Section 2)
- Appropriates $15,000 from the General Fund (nonrecurring) for the 2026–2027 fiscal year.
- Use: Educational materials and public/county tax collector assistance related to the updated penalty provision.

Effective Date

  • Section 1 (the penalty modification) applies to payments made on or after the date the act becomes law.
  • The remainder of the act becomes effective when the act becomes law (standard lag for non-penalty provisions).

Potential Impact

  • Taxpayers: If the NSF penalty is reduced or recalibrated, penalties for bounced tax payments may become less punitive, particularly for large tax bills (e.g., substantial property taxes).
  • Counties/Tax Collectors: The change aims to better align penalties with actual administrative costs and reduce over-penalization, potentially lowering disputes and appeals related to NSF penalties.
  • Public Education: The added funding supports outreach to inform taxpayers about the new penalty structure and payment options.

Notes

  • The bill was introduced in 2025–2026 session and authored by Rep. Rubin with several co-sponsors.
  • The exact revised penalty calculation in Section 1 requires reviewing the full amended text of G.S. 105-357(b) as proposed in the bill. The summary reflects the bill’s stated intent to modify the existing penalty to be fairer and cost-aligned.

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

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