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HB 637

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136th Legislature (2025-2026) Introduced by Ty Mathews

Expands NC homestead circuit breaker to cover low/moderate-income homeowners regardless of age/disability; counties reimbursed by state for the resulting deferrals.

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Bill Summary · HB 637

Summary — HB 637: Expand Property Tax Homestead Circuit Breaker

Status: Enacted as Act 158 (signed by Governor May 13, 2025; effective May 13, 2025)
Primary subject: Property tax relief / taxation (homestead “circuit breaker”) — North Carolina (G.S. 105‑277.1B)

Purpose / Intent

The bill expands eligibility for North Carolina’s property tax homestead circuit breaker so that more low‑ and moderate‑income homeowners can defer a portion of property taxes on their primary residence. It removes the prior age/disability requirement for participation and requires the State to reimburse local governments for revenue losses caused by the expansion.

Key provisions

  • Eligibility change
    • Removes the requirement that a qualifying owner be at least 65 years old or totally and permanently disabled. All other eligibility conditions remain.
    • A “qualifying owner” must:
    • Have household income for the preceding calendar year not exceeding 150% of the statutory income eligibility limit (see G.S. 105‑277.1(a2) for the income eligibility limit definition).
    • Have owned and occupied the residence as a permanent home for at least five consecutive years (as of January 1 preceding the taxable year).
    • Be a North Carolina resident.
  • Tax deferral (unchanged mechanics)
    • A qualifying owner may defer the portion of current property tax on the permanent residence that exceeds a set percentage of the owner’s income:
    • If income is at or below the income eligibility limit → tax cap = 4% of income.
    • If income is above the income eligibility limit up to 150% of that limit → tax cap = 5% of income.
    • Deferred amounts are recorded as deferred taxes and become a lien on the property (per G.S. 105‑355(a)).
    • Deferred taxes for the preceding three fiscal years become due when the property loses eligibility because of a listed “disqualifying event” (sale, cessation of use as a primary residence, or owner death unless title/occupancy passes to a qualifying co‑owner or spouse).
  • Multiple owners
    • Husband and wife owning and occupying a residence receive the full benefit even if only one spouse meets the age/tenure requirement (applies similarly under the expanded rule).
    • When co‑owners other than spouses hold title, all owners must meet eligibility and elect deferral.
  • Application and notice
    • Applications should be filed during the regular listing period but are accepted up through June 1 preceding the tax year claimed.
    • Tax collectors must notify owners of deferred tax balances by September 1 each year.
  • State reimbursement to local governments
    • The State will reimburse counties for the “hold harmless amount” (the taxes deferred) attributable to the expansion.
    • Counties must notify the Secretary of Revenue of their total hold harmless amount on or before September 1 in a manner prescribed by the Secretary to be eligible for reimbursement. (Failure to notify by the deadline bars reimbursement for that taxable year.)

Who is affected

  • Newly eligible homeowners: lower‑ and moderate‑income owners who meet the income and five‑year ownership/occupancy tests but previously did not qualify due to age/disability restrictions.
  • Local taxing units (counties and municipalities): will experience lower property tax receipts due to additional tax deferrals but are to be reimbursed by the State when procedural requirements are met.
  • County tax collectors, assessors and the Department of Revenue: administrative responsibilities increase (processing expanded applications, tracking deferred tax liens, annual reporting to Secretary of Revenue).

Fiscal and administrative impact

  • Expands the population eligible for tax deferral → reduces near‑term local property tax collections; net local fiscal effect is mitigated by the State reimbursement requirement.
  • Administrative workload increases for local tax offices (application processing, deferred tax accounting, annual reporting) and for the Department of Revenue (reimbursement processing).

Effective date

  • The measure was enacted as Act 158 and is effective May 13, 2025 (per legislative actions provided).

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

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