NCGA North Carolina General Assembly advances Truth-In-Taxation Bill

North Carolina is awash with property tax-related developments. In the past couple of weeks, Raleigh and Charlotte city council members voted to raise property taxes, as have Wake County commissioners. Local officials in North Carolina’s largest cities are voting to raise property tax rates at the same time that the North Carolina General Assembly is advancing reforms that will restrict local governments’ ability to raise property taxes as much as they have in the past. 

This week on Tuesday, June 16, the North Carolina Senate Committee on State and Local Government voted to advance Senate Bill 992, “Truth-In-Taxation” legislation that will increase transparency in property taxation and establish a series of steps that local politicians must take in order to raise property taxes. 

SB 992 would require local governments, upon completion of the reappraisal process, to inform homeowners about the “revenue neutral” rate, which is the rate that must be assessed in order to ensure property tax bills do not rise as a result of reappraisal. While SB 992 does not force local governments to adopt the revenue neutral property tax rate, the official bill summary explains how this reform will require local governments to take the following steps before adopting property tax rates that exceed the revenue neutral rate: 

• Publish notice of intent to exceed the revenue-neutral rate (i) in a newspaper of general circulation at least 1 week prior to the hearing and (ii) on the government’s website at least 10 days prior to the hearing. 

• Notify the county clerk of its intent to exceed the revenue-neutral rate at least 30 days prior to the hearing. The clerk must then send notice, by first class mail or electronic mail, to all affected taxpayers at least 10 days prior to the hearing. The notice must contain the following information for each taxing unit associated with the taxpayer’s property that is proposing to adopt a rate in excess of its revenue-neutral rate: 

  • The proposed amount of revenue the unit needs to balance its budget.
  • The revenue-neutral rate. 
  • The proposed tax rate.
  • The amount of tax due on the property for the current tax year. 
  • The estimated amount of tax due on the property for the upcoming year (i) if the revenue neutral rate is adopted and (ii) if the proposed tax rate is adopted. 
  • The date, time, and location of the public hearing. 

Any local governments that approve property tax rates exceeding the revenue neutral rate without following the aforementioned steps, as the bill summary notes, “must refund any amount of property tax collected in excess of the amount that would have been collected under the revenue-neutral rate.” SB 992 now heads to the Senate Finance Committee for further consideration. If enacted, North Carolina would join four other states that have similar Truth-In-Taxation laws. 

Former Utah Senator Howard Stephenson calls Truth-in-Taxation, which has been on the books since 1985 and is considered by many to be the gold standard, Utah’s most taxpayer-friendly law.

“While Truth-in-Taxation does not technically limit property taxes, it makes local elected officials think twice about increasing property tax rates because they know all citizens will be notified of the increase and its potential impact on their property,” notes Stephenson. “They also know that they will have to hold a broadly advertised public hearing where citizens can sound off about the proposed tax hike.” 

Regardless of what happens with SB 992, North Carolina voters will have the opportunity this fall to approve a constitutional safeguard against rising property taxes. Thanks to the North Carolina General Assembly’s approval last month of HB 1083, a measure to install a property tax levy limit that restricts the rate of growth in property tax collections will appear on the November ballot in North Carolina.