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Bill Summary · HB 1092

Summary of HB 1092 (Reform NC Property Tax)

Session: 2025 | Jurisdiction: North Carolina | Sponsor: Rep. Ager

This bill combines a constitutional amendment proposal, modifications to existing property tax relief programs, expanded nonprofit housing exemptions, and funding for more frequent property reappraisals. It is organized into four main parts with associated effective dates and a funding provision for a grant program.

1) Constitutional Amendment: Allow Property Tax Relief Based on Area Median Income (AMI)

  • Purpose: Enable the General Assembly to use area median income (AMI) as a statewide criterion to provide property tax relief.
  • Text changes proposed: Rewrite of Section 2 of Article V of the NC Constitution to authorize area median income as a basis for tax relief and to require statewide applicability of exemptions.
  • Referendum: The amendment would be submitted to voters at the statewide general election on November 3, 2026.
  • Ballot language: “Constitutional amendment to allow the General Assembly to use area median income as a criterion for affording property tax relief on a statewide basis.”
  • Approval process: If a majority vote in favor, the amendment becomes effective upon certification by the State Board of Elections/Secretary of State; if defeated, the amendment has no effect.

2) Property Tax Homestead Circuit Breaker: Modifications

  • Section affected: G.S. 105-277.1B (Property tax homestead circuit breaker).
  • Key changes:
    • Income eligibility limit is tied to county AMI:
    • Non-married qualifying owner: 100% of county AMI.
    • Married qualifying owner: 115% of county AMI.
    • Qualifying owner requirements (as of January 1 preceding the taxable year):
    • Income ≤ 150% of the section (c) limit.
    • Owned and occupied the residence as permanent residence for at least 5 consecutive years.
    • Age ≥ 65 or totally and permanently disabled.
    • North Carolina resident.
    • Multiple-owner rules:
    • If both spouses meet the requirements, full benefit applies.
    • If more than two owners (non-spouse), all owners must qualify and elect to defer taxes.
    • Tax deferral mechanics:
    • Defines how much of the tax can be deferred based on income vs. the applicable percentage (4.0% and 5.0% tiers) and proportional allocation across taxing units if multiple units are involved.
    • Temporary absence: Qualifying owner can temporarily be away for health/rest home without losing eligibility.
    • Deferment lien and disqualification:
    • Deferred taxes become a lien; certain disqualifying events (transfer, death, ceasing to use as permanent residence) have specific effects or exceptions.
    • Disqualification events and notice requirements for deferred amounts.
  • Overall effect: Adjusts income thresholds and ownership/occupancy criteria to determine eligibility and the amount of property tax deferral under the homestead circuit breaker.

3) Nonprofit Housing Property Tax Exemptions: Expansions and Clarifications

  • Section 3(a) adds nonprofit housing for low or moderate incomes to existing exempt categories.
  • Expanded nonprofit exemption: Real or personal property used for charitable purposes by certain nonprofit organizations is exempt if used for charitable purposes and the owner is nonprofit (specific to low- or moderate-income housing).
  • Nonprofit housing provisions updated:
    • Section 3(b)-(e) introduces and clarifies new exemption conditions for nonprofit-owned housing, including:
    • Real property used for affordable rental housing under an eligible nonprofit corporation or eligible joint venture.
    • Definitions for eligible nonprofit corporations, affordable rental housing (50%+ units), rent limits, and income limits (80% AMI, adjusted for family size).
    • Government-supported vs. non-government-supported affordable rental housing:
      • Government-supported: exemption if ownership/operation by eligible nonprofit/joint venture with compliance to federal/state financing and deed or regulatory restrictions for at least 15 years.
      • Non-government-supported: exemption if 100% owned/operated by an eligible nonprofit that has owned housing for at least 5 years, does not receive funding from for-profit affiliates, does not lease to another for-profit, and executes a 15-year deed restriction restricting operation as affordable housing.
    • Exemption amount:
    • Based on the percentage of qualifying units; if safe harbor under IRS Rev. Proc. 96-32 is met, exemption can be 100% of appraised value.
    • Transition provisions allow some properties to qualify during a transition year based on unit rents rather than full income verification.
    • Application and compliance:
    • Requires annual certification by January 31, including evidence of unit mix, rents, and incomes; annual reporting to taxing units; income verification every two years thereafter.
    • Future site provisions:
    • Properties classified as future sites for affordable housing may be exempt for up to 5 years, with liens and deferred taxes similar to other exemptions; failure to develop within 5 years triggers disqualification or extinguishment of liens upon timely development.

4) New Exemption for Affordable Rental Housing via Nonprofits (G.S. 105-278.7A)

  • Creates a new exemption specifically for real and personal property owned by eligible nonprofit corporations or joint ventures used for affordable rental housing.
  • Key components:
    • Definitions: affordable rental housing, eligible nonprofit, affiliate, income limit (80% AMI), qualifying unit, and rent limit (no more than 30% of income limit plus utilities).
    • Government-supported vs. non-government-supported frameworks mirror those in Section 3, with conditions for deed restrictions or regulatory agreements lasting at least 15 years.
    • Compliance and reporting: Annual certification and documentation requirements, with enforcement provisions similar to other exemptions.
    • Application requirements: Requires documentation tied to eligibility, deed restrictions, regulatory agreements, and transition considerations if applicable.
    • Future site and restricted use: If not used as affordable housing in compliance, the exemption can be subject to recapture or disqualification; task-specific timelines apply.

5) Administrative and Effective Dates

  • Effective date for several sections:
    • Section 2 (Homestead circuit breaker changes) becomes effective for taxable years beginning on or after July 1, 2027, only if the constitutional amendment in Section 1 is approved. If the amendment fails, Section 2 has no effect.
    • Section 3 and related nonprofit provisions are effective as enacted (generally upon the act becoming law, with transition rules for existing properties).
    • Section 4 (Grant funding for reappraisal technology) becomes effective July 1, 2026.
  • Additional: Section 4(a) appropriates $20 million from the General Fund for 2026-2027 to fund grants to local governments through the NC Association of County Commissioners to move toward shorter reappraisal cycles and invest in technology/implementation.

6) Funding and Administration

  • Section 4 provides a one-time appropriation of $20 million to the North Carolina Association of County Commissioners for grants to local governments for:
    • Shortened reappraisal cycles
    • Technical assistance
    • Capital investments in software, data migration, and digital systems
  • Priority for jurisdictions with appraisal cycles longer than four years.

Potential Impacts

  • Tax Relief Targeting: Expands constitutional and statutory mechanisms to deliver property tax relief based on AMI, potentially expanding relief to more homeowners and adjusting eligibility by county AMI rather than fixed thresholds.
  • Homestead Benefits: Alters income thresholds and occupancy/ownership requirements, potentially broadening or tightening eligibility for the circuit breaker depending on AMI and household composition.
  • Nonprofit Housing Exemptions: Significantly broadens real and personal property exemptions for nonprofit operators of affordable housing, including government- and non-government-supported models, with detailed compliance and reporting requirements. Aims to improve the financial viability of affordable housing by reducing property taxes, with long-term deed restrictions to ensure continued affordability.
  • Local Government Capacity: Provides funding to modernize appraisal practices, aiming to shorten cycles and improve accuracy, which could affect assessed values and the frequency of tax bills.

Note: If the constitutional amendment in Section 1 is not approved, Section 2 and its reform of the homestead circuit breaker do not take effect. The bill combines constitutional change, tax relief policy, housing exemption expansions, and a targeted investments in reappraisal infrastructure.

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

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