Summary of HB 1181 (Session 2025, North Carolina) — Property Tax Modifications
Date Filed: 2026-04-30
Authorizing body: General Assembly of North Carolina
Sponsor: Representative Cervania (co-sponsors: Maria Cervania, Phil Rubin)
Status: Introduces a multi-part package of property tax reforms, including changes to homestead relief, reappraisal support, and the creation of an excise tax on transfers of controlling interests in real-property-holding entities.
Purpose and overall intent
- Modernize and expand property tax relief for elderly and disabled homeowners.
- Shorten and improve the accuracy of property reappraisals by funding counties.
- Create an excise tax on transfers of controlling interests in entities that own real property to capture tax revenue from real-property transfers not only by deeds but also via entity-level transactions.
- Align administrative processes with expanded definitions and eligibility criteria for relief programs.
Key provisions and changes
1) Elderly/Disabled Property Tax Homestead Exclusion — spousal income limit
- Adds a spousal income-limitation exception: Married applicants living with spouses may qualify if their combined income does not exceed 115% of the income-eligibility limit used for the standard exclusion (as determined under subsection (a2) of G.S. 105-277.1).
- This expands access for married couples who otherwise would be denied because one spouse’s income alone would exceed the limit.
2) Property Tax Homestead Circuit Breaker — program scope and eligibility
- Revises G.S. 105-277.1B (the circuit breaker program) to:
- Establish AMI-based eligibility: 70% of the area median income (AMI) for a two-person household in the county, as determined by HUD figures as of Jan. 1 preceding the tax year.
- Qualifying owner criteria (as of Jan. 1 preceding the tax year):
- Income not exceeding 150% of the income-eligibility limit (as defined in the statute).
- Ownership and occupancy of the property as permanent residence for at least five consecutive years.
- Age 65+ or total disability.
- North Carolina residency.
- Married couples: If one spouse meets the occupancy/age/disability criteria, the other can still receive the full benefit (similar to the enhanced spousal provision).
- If more than two owners (other than spouses), all owners must qualify and elect to defer taxes.
3) Tax deferral amounts and timing
- Provides a tiered deferral based on income relative to the eligibility limit:
- For incomes up to 150% of the limit: 5.0% deferment.
- For income over the limit: 4.0% deferment, with higher deferment thresholds in the f and f1 subsections when AMI allowances apply.
- An alternate tax limitation (f1) provides up to 6.0% deferment if AMI is up to the 150% threshold; if AMI is over 150% of the limit, the 6.0% applies up to the AMI limit.
- Provisions ensure proper apportionment of taxes among multiple taxing units if the total exceeds the individual unit’s share.
- Temporary absence allowances: benefit persists if the owner is away for health reasons or while in a rest/nursing home, provided the residence remains the owner’s permanent residence.
4) Reappraisal assistance for counties
- Establishes a $20 million nonrecurring appropriation to the North Carolina Association of County Commissioners (for Fiscal Year 2026-2027) to help counties:
- Transition to shortened reappraisal cycles.
- Improve accuracy and frequency of property valuations.
- Educate the public about property taxes and relief programs.
- Fund one-time capital investments in technology and infrastructure to support reappraisals (e.g., software, data migration, digital systems).
- Preference to counties with reappraisal cycles longer than four years.
5) Filing cadence and process for the circuit breaker
- Requires a triennial application: qualifying property owners must file once to receive the benefit for the current tax year and the two subsequent years, unless eligibility is lost due to a disqualifying event. This replaces annual application requirements for ongoing eligibility.
6) Excise tax on controlling-interest transfers
- Creates a new Article 8F (G.S. 105-228.40 et seq.) imposing an excise tax on transferring a controlling interest in an entity that holds a real property interest in the state.
- Key definitions:
- Controlling interest: more than 50% voting power or beneficial interest in a corporation, or >50% of capital/profits in other entities.
- Real property interest and value: FMV of the real property interest, with a rebuttable presumption for value to be the higher of current assessed value or purchase price within five years.
- Tax details:
- Tax rate: $1 per $500 (or fraction) of the value of the real property interest transferred.
- Applies to transfers within any 36-month period when value exceeds $100.
- Reporting/payment due within 30 days; Register of Deeds records a Notice of Controlling Interest Transfer.
- Exemptions include publicly traded securities, transfers by death, transfers between spouses, and certain mergers.
- Penalties for failure to file (25% of tax due) and for fraud (Class 1 misdemeanor).
- Effective date: January 1, 2027 for transfers occurring on or after that date.
7) Public-records and disclosures
- Clarifies that local tax records containing income/receipts information are not public records, with explicit allowances for disclosures related to the circuit breaker on tax receipts.
Effective and implementation timeline
- Section 1 (income spousal limit, circuit breaker changes) generally applies to taxable years beginning on or after July 1, 2027.
- Section 3 (county reappraisal funding) becomes effective July 1, 2026.
- Section 4 (excise tax on controlling-interest transfers) becomes effective January 1, 2027, with applicability to transfers occurring on or after that date.
- Other sections follow the dates specified within their provisions.
Potential impact and considerations
- Homeowners: Expanded eligibility for elderly/disabled exclusions and circuit breaker benefits, especially for married couples; potential for greater relief for low- to moderate-income seniors.
- Counties: Additional funding for reappraisal modernization, possibly leading to more accurate valuations and tax collections.
- Real property market: The new controlling-interest excise tax could affect transactions involving property-holding entities and influence the structuring of property ownership.
- Tax administration: New filing cadence (triennial) and reporting requirements will shape assessor and treasurer workflows, as well as public communication.
This summary highlights the bill’s substantive provisions, targeted groups, and key implementation timelines to inform readers about its scope and potential effects.
