Recent Blog Posts

  • Does Partial Construction Count as “Use” for Property Tax Exemptions?

    Authored by: on Monday, March 12th, 2018

    Loyal readers of this blog know that most property tax exemptions and exclusions require that property be used for exempt purposes to avoid being taxed.  The fact that a qualified owner (school, religious organization, charitable non-profit, etc.) owns a building does not automatically make that building exempt.  That building must be used for the owner’s exempt purpose (education, religious worship, charitable endeavors, etc.) to be exempt from property taxes.

    For example, if the non-profit Food Bank of Western NC builds a new food warehouse, that building will likely be exempt from property taxes because it is used for the organization’s charitable purpose.  But if the Food Bank builds a small office building and rents it out to commercial tenants (coffee shop, nail salon, etc.), that building would not qualify for an exemption because it is not being used for a charitable purpose.

    Because of the use requirement, vacant land and buildings are generally taxable even if they are owned by a qualified owner because they are not being used for the owner’s exempt purpose.  But what about property that is being prepared for use but not yet ready for that use as of January 1 (the listing date)? Consider a partially constructed building or a parking lot site being graded but not yet paved.  Is that property being “used” for an exempt purpose?

    Most exemption/exclusion statutes don’t address this issue, meaning it’s up for county assessors to make this call.  Most North Carolina assessors would say no, construction does not count as an exempt use. If property is under construction as of January 1, 2018, the property will be taxable for 2018 and might be exempt for 2019 if construction is completed and the building is put into use by the end of the year.

    This might change after a bombshell of an opinion issued by the Property Tax Commission in January.

    Read more »

  • Your Reservation Has Changed: Regulating the Sharing-Economy

    Authored by: on Thursday, February 15th, 2018

    Picture this: You’re the attorney for a small town that is not commonly visited by tourists. There are only about five short term rental properties in your jurisdiction listed on Airbnb. One of these rental properties is in a quiet residential neighborhood on a dead-end street. The neighboring property owner is furious that the property is being used as an STR. He claims that STRs threaten neighborhood safety and demands that the town act NOW to ban transient rentals. What’s a town attorney to do? The answer: maybe nothing. It’s really up to the municipality to consider the pros and cons of regulating this market.

    In my first blog on short term rentals (which I suggest reading first), found here, I note that the great majority of North Carolina’s cities have not enacted separate ordinances to regulate short term rental properties (“STRs”). This is likely because there is no need for additional regulation (STRs are not problematic) or because a preexisting ordinance sufficiently regulates this area. Thus, if you’re concerned that your municipality has lagged behind by not taking action to regulate this market, fear not. There may not be a need to regulate unless you have valid concerns that fall within the scope of the police powers. See here for more on this.

    For those of you who are interested in adopting some type of regulations, this blog is for you. Its purpose is to discuss the varied aspects of regulating STRs and provide local governments with a better understanding of how to collect the taxes generated by these types of rentals.

    Our city is considering regulating STRs—now what?

    Read more »

  • The Airbnb Gold Rush: What’s a City to Do?

    Authored by: on Thursday, February 15th, 2018

    Most of us know that Airbnb is popular, but how big is it really? Well, the statistics are mind-boggling. Airbnb is currently valued at $31 billion. By mid-2017, it had 4 million listings in 191 countries worldwide, which surpassed the number of available rooms in the top five hotel brands combined, with a mere 3.3 million global listings. According to the News & Observer, Asheville residents earned nearly $20 million in 2017 by renting their homes to nearly 160,000 guests. Charlotte, Raleigh and Durham also profited—residents in these cities made 8.7 million, 3.8 million and 3.1 million respectively. And approximately 25% of leisure travelers are expected to book a stay on Airbnb at least once. The answer: it’s HUGE.

    It is not just Airbnb that is exploding. As the sharing economy continues to grow, web-based booking sites like VRBO, Homeaway and FlipKey are also gaining momentum. These booking platforms are here to stay. Local governments have begun to ask what, if any, steps they should take to regulate the short term rental market? To be clear, a short term rental (“STR” for short) is usually for a term of 30 days or less. Both nationwide and locally, the regulation of these properties has become a hot topic as some cities have opted to ban these rentals while others have chosen to let sleeping dogs (or houses) lie.

    This is my first of two blogs on STR regulation. It discusses the key issues surrounding regulation and highlights how a few North Carolina municipalities are responding to this changing market. The second blog goes into more detail on how to regulate STRs and discusses the tax implications. You can find it here.

    Read more »

  • Beyond the Property Tax

    Authored by: on Tuesday, January 30th, 2018

    Local government tax offices do a lot more these days than collect property taxes.  Many local tax officials are charged with collecting a variety of other taxes (occupancy, beer and wine, or animal taxes, perhaps) and fees (EMS, nuisance abatement, and storm water, to name a few).  Enforcement remedies, interest,and penalties can vary widely from tax to tax and fee to fee.

    My new bulletin (Property Tax Bulletin #174) summarizes the collection details for a number of these other taxes and fees (14 of them, in fact.)  Much has changed since I last wrote a bulletin on this topic in 2011, most significantly the adoption of the “Tag & Tax Together” system for motor vehicle taxes in 2013 and the elimination of local privilege license taxes in 2015. Read more »

  • Let it Snow!?!? Interest and Inclement Weather

    Authored by: on Wednesday, January 3rd, 2018

    Facebook postings of icebergs floating off the coast of Nags Head are fake news, but snow and ice is in fact predicted for eastern North Carolina over the next few days.  This storm is poorly timed for last-minute taxpayers because the delinquency date for 2017 property taxes is this Saturday, January 6.  If taxpayers don’t pay their 2017 taxes by Friday, they will accrue 2% interest for the month of January.

    The possible collision of ice and interest has caused many county officials to contact me with this question:

    If the county tax office is closed on Friday due to inclement weather, may the county move the delinquency date to next week and allow taxpayers to pay their 2017 property taxes without interest on Monday, January 8?

    The legal, technical answer is “no.” But the practical answer is “it’s probably okay if your commissioners and attorney sign off on that decision.”

    Read more »

  • Waiting to Be Engaged or Engaged to Wait? When is On-Call Time Compensable under the FLSA?

    Authored by: on Tuesday, January 2nd, 2018

    Most local governments require at least some employees to be on-call to return to work in the event of an emergency. Departments with on-call requirements may include water, sewer and other utilities, public works, law enforcement, fire, EMS, emergency management, social services and information technology. Whether such employees must be paid for the time they are on-call time can be a vexing question. This blog post sets out the Fair Labor Standards Act rules governing compensation of on-call time. Read more »

  • 2018 Property Tax Prepayments

    Authored by: on Thursday, December 28th, 2017

    The recent federal tax bill signed by the president last week caps the deductions for state and local taxes at $10,000 beginning with the 2018 tax year. This major change is prompting many North Carolina taxpayers to prepay their 2018 local property taxes in 2017 so that they may (hopefully) deduct those payments on their 2017 federal income tax returns.  Guilford County, for example, has already received $1.2 million in 2018 prepayments, double what they received in prepayments for 2017 all last year.

    While this early influx of cash is a nice holiday present for local governments, new guidance issued by the IRS yesterday suggests that the 2018 prepayments may not produce the federal income tax deductions taxpayers expect.  Here’s a quick Q&A on the issue for local tax offices: Read more »