The General Assembly has focused much attention on property taxes this year. I’ve already blogged about one big bill that became law and two other big bills that might pass later this year. Today I summarize a collection of laws that made relatively minor changes to our property tax system as well as a proposed constitutional amendment that could be momentous. I'll lead with that . . .
I. Proposed Constitutional Amendment: Are Property Tax Levy Limits Headed Our Way?
Come November, all North Carolina voters will be presented with this question: should Article V, Section 2, of the state constitution be amended to state: The General Assembly shall enact general laws limiting the amount by which the levy of taxes on property may increase, which may include exceptions.
See S.L. 2026-5 for details of the required referendum.
Right now, the only existing fiscal limitation on local property taxes in our General Statutes is a rate cap of $1.50. (G.S. 153A-149(c) for counties and G.S. 160A-209(d) for cities). No local government is currently close to that cap. The highest county tax rate this year is $.93 in Bertie County. That happens also be the highest municipal tax rate that I could find, which was last year in Enfield.
Note that this cap applies per jurisdiction. If you live in a city, you very likely pay a combined city/county property tax rate of over $1.50. That’s okay so long as the city and the county rates are each under $1.50.
Beyond the $1.50 tax rate cap, currently there is no limitation in our statutes on how much a local government may increase its property tax levy from year to year. But if the proposed amendment passes, that may change.
The proposed amendment grants the General Assembly discretion to decide what type of limit on property tax increases it wishes to adopt. Presumably, the General Assembly could satisfy the proposed amendment by adopting a limit on annual increases in appraisal values (for example, Florida limits the increase in tax appraisals for primary residences to 3%) or tax rates (for example, South Carolina limits the increase in local tax rates to the percentage increase in population plus inflation) or total tax levies (for example, New York limits the increase in local property tax levies to 2%).
The General Assembly would also retain discretion as to the timing of any property tax limitations under the proposed amendment. If the amendment is approved, the General Assembly might act in response immediately. Or not. It is entirely up to the legislature.
Finally, remember that the General Assembly already has the authority to enact limits on local property taxes given that our state constitution does not prohibit such legislation. Even if this amendment were to fail at the polls, the General Assembly could move forward with property tax limitations if it so desired.
II. The Penny Panic Solved
The last Unites States penny was minted in November 2025, leading tax offices to wonder what they should do about making correct change once their stash of Abe Lincolns ran dry. The General Assembly solved that problem over the summer by amending GS 105-357 to allow tax offices to round bills down to the nearest nickel when taxpayers pay in person in cash. S.L. 2026-31, §14(j). Previously, tax offices were allowed to forgive small underpayments of less than a dollar only for payments made other than in person.
Here’s how the new rule should work. If Tina Tarheel appears at the tax office to pay her tax bill of $99.97 and hands the tax office a $100 bill, the tax office may round that bill down to $99.95, give Tina a nickel in change, and treat the bill as paid in full. As is true for “traditional” small underpayments, the tax collector must keep records of all penny underpayments and report the total in the annual settlement.
For more details on the penny bill, including how it might affect other local government offices, see Kara Millonzi's blog here.
III. Exemptions for Pet Semataries? No Longer
Yes, I misspelled cemeteries, intentionally as an homage to one of Stephen King’s scariest books. Over the years I have received a few questions about whether the exclusion for burial grounds in GS 105-278.2 could apply to land used to bury deceased pets. As crazy as that question sounds, it was reasonable under the prior statutory language. But no more. S.L. 2026-31, §6.1 changed that statute so that it now applies only to “human” burial grounds. Sorry, Snoopy.
IV. Two Small Machinery Act Changes
Section 6.2 of S.L. 2026-31 allows refunds of fire district taxes to extend back 10 years instead of the 5-year period that applies to “regular” refunds in G.S. 105-381. But only for a year; this provision expires July 1, 2027.
Section 6.3 of that same bill creates an explicit prohibition against double taxation. It's unclear what practical impact this change will have, given that under current law double taxation was assumed to be an illegal tax and therefore justification for a refund under G.S. 105-381.
V. “Incentive Districts” for New Development
A local government may now create an “incentive district” for new development eligible for project development financing debt instruments under Article 6 of Chapter 159. S.L. 2026-12. All property within that district would receive a 90% exclusion for 10 years or until the property is sold. If the district is proposed by a municipality, then the county must receive notice and the opportunity to reject the proposal. Property receiving the incentive may not also benefit from the builders’ inventory exclusion in GS 105-277.02.
This new provision is one of the very few exclusions over which local governments have control; if they don’t want to offer this exclusion to new development, they are not required to do so. It raises interesting questions as to whether the General Assembly could create other “optional” exclusions (perhaps a more expansive circuit breaker?) without violating the N.C. Constitution’s uniformity provision.
