The law surrounding property tax exemption applications, already confusing, was made even murkier under a bill recently signed by the governor.  Session Law 2025-20 (HB91) allows for retroactive exemption applications, but only for the religious exemption and only for the five tax years preceding the effective date of the bill.  What’s more, the bill does not change the language of the relevant statutes, meaning that you will never see the impact of the bill when reading those statutes on-line.  Today’s blog outlines current exemption application law and the likely consequences of the new law.

Existing Rules for Exemption Applications

GS 105-282.1 states that all exemptions and exclusions require annual applications unless special rules apply.  And there are a lot of special rules!

Several exemptions do not require applications, including those covering burial property, government property, and inventory.  These types of property are automatically exempt with no action required by the taxpayer.

Many of the more popular exemptions and exclusions require only a single initial application, including the present use value exclusion, the elderly/disabled homestead exclusion, and the exemptions for historic, charitable, religious, and educational property. For single-application exemptions, taxpayers are expected to update their applications when they obtain new property or change the use of their existing property. New applications are also required when ownership of the property changes; new owners do not automatically step into the shoes of the previous owners even if the use of the property remains the same.

When exemption applications are required, they must be filed by the end of the listing period. GS 105-282.1(a).  Well, most of them; applications for the three “residential property tax relief programs”—the circuit breaker, disabled veterans, and elderly/disabled homestead exclusions—are due June 1. (see GS 105-277.1(c), -277.1B(n), and -277.1C(f)).

But these deadlines are not really set in stone, because GS 105-282.1(a1) allows the board to accept late applications through the end of the calendar year “upon a showing of good cause.”  The statute does not define good cause, meaning each board can decide for itself what justifies a late application.  I discuss that issue in more detail here.

While boards have flexibility to accept applications through December 31, once the calendar turns to January 1 the opportunity to accept applications for the tax year that began the previous July 1 ends. Counties cannot accept retroactive exemption applications for tax years that began in prior calendar years.  For example, the absolute last day to accept an exemption application for the 2025-2026 tax year is December 31, 2025.

How SL 2025-20 Changes The Existing Rules

The new law allows retroactive applications (i) only for the religious exemption under GS 105-278.3, (ii) only for taxes levied in the five calendar years preceding the effective date of the law (June 26, 2025), and (iii) only for releases and not refunds if the retroactive exemption is granted.  Here is what I think this all means . . .

Taxpayers may submit retroactive applications for the religious exemption for tax years 2020 through 2024. The board is not required to accept those late applications; it retains the right under GS 105-282.1(a1) to determine if “good cause” exists.  If the board decides to accept the applications, then the assessor must determine if the taxpayer actually qualified for the exemption for the tax years in question. If the assessor approves the applications, then the county must release any taxes on the property for the years in question. If the taxpayer has already paid the taxes for those years, the county is not permitted to refund those taxes.

SL 2025-20 does not place any time limitations on when retroaction applications for religious exemptions for the years 2020 to 2024 must be submitted.  This approach is consistent with the lack of a time limitation on releases under GS 105-381 (as compared to the five-year limitation on refunds created by that statute).

An example might help explain this somewhat confusing new provision.  Assume that the Church of the Benevolent Blue Devil maintains a sanctuary and office space on Parcel A in Durham, on which it has been receiving the religious exemption for many years.

In 2020 the Church purchased Parcel B, an adjoining property, which it uses for youth group and Bible study activities. However, the Church never submitted an exemption application for Parcel B. The city and county have been billing taxes on Parcel B to the Church since 2021, but the Church assumed it was exempt and has been ignoring the bills.

In July 2025, the county contacts the Church and demands payment of the delinquent property taxes on Parcel B.  In response, the Church files late exemption applications for Parcel B for the years 2021 through 2025.

Prior to SL 2025-20, the county should have rejected the applications for the years 2021 through 2024 because they were submitted after December 31 of the year in which the taxes were levied.  The 2025 application, although submitted after the close of the listing period, could be accepted if the board determined that good cause existed under GS 105-282.1(a1) because it was submitted prior to December 31, 2025.

But as a result of SL 2025-20, the county must now apply the “good cause” standard of review under GS 105-282.1(a1) to all of the late applications.  If the county accepts the applications, then the assessor must determine if the Church qualified for the religious exemption on Parcel B for each of those years and, if so, the county must release the taxes on Parcel B for those years.  

The new law permits only releases, not refunds. If the Church had paid the taxes on Parcel B for any of the prior tax years it could not get those payments refunded even if it obtained a retroactive exemption.

SL 2025-20 is “Uncodified”

The bill does not formally amend GS 105-278.3 or -282.1 to reflect the ability of taxpayers to seek retroactive religious exemptions. As a result, the only written references to this legal change will be the bill itself and, presumably, explanatory notes added under each of those statutes in written compilations.  The on-line version of our General Statutes made available by the General Assembly does not contain any explanatory notes, so readers using that source will not be alerted to the changes created by SL 2025-20.  Regardless, SL 2025-20 is the law of the land and must be honored by all local governments.