If you own a car or residence, then you already know that a property tax exists in North Carolina. In our experience, most businesses have in the past paid little attention to how property taxes impact their business.
More recently, however, property taxes have become a significant issue for businesses due to the effect of inflation on property values and localities’ increasing need for funds. As the need for raising additional revenues has become more pressing, localities have become more aggressive in their application and collection of property taxes.
The types of business property subject to the property tax can be broken down into three general categories:
- Real property (land and buildings)
- Personal property (equipment, furniture, supplies, etc.)
- Motor vehicles
As you can imagine, the type that’s most concerning—and most costly—for most businesses is real property.
2017 is a Revaluation Year for Real Property Tax in Forsyth, Guilford, Davie, Yadkin and Alamance Counties (and More)
Each county in North Carolina is required to revalue for property tax purposes all real property within its borders at least once every eight years, although some do it more frequently, generally on a four-year cycle. North Carolina has 100 counties, and their revaluations are staggered so that only some counties are performing a revaluation in any given year.
This year is a property tax revaluation year for 24 North Carolina counties, including Forysth, Guilford, Davie, Yadkin and Alamance counties. Paying attention to revaluation years is critical, since assessment reductions achieved through a successful property tax appeal are not retroactive. So, your opportunity to maximize potential savings from a property tax appeal is dependent upon filing that appeal during a revaluation year.
If you are responsible for monitoring property tax assessments of real property in any of these 24 counties, be on the lookout for revaluation notices, which should be mailed to the owner of record. These notices will likely be sent sometime between January to March. If you wish to appeal the assessment shown on your notice, the first step is to request that the county conduct an informal review. The clock on that deadline starts to run when the revaluation notice is sent, so overlooking the revaluation notice is the first of many potential potholes in the road to a successful property tax appeal.
Understanding How Property Tax is Assessed: Listing, Appraisals and Valuation
Essential to the understanding of the property tax system are the concepts of “listing” and “appraisal.”
- Listing refers to the requirement that property owners file a report showing the property owned by them as of the listing date of January 1. The type of information required and the listing itself varies between real property and personal property. For real property, counties maintain a permanent listing system, which only requires owners to file a listing if they’ve modified their real property within the last year. For personal property, property owners must still file a full listing of the personal property they own by January 31 of each year.
- Based on the listing, the property is then “appraised” or valued for property tax purposes. How this value is derived and how frequently it’s changed varies depending on whether you are dealing with real property or personal property
Once all property has been listed and appraised, the county or city governing body sets a tax rate and bills are sent out to the property owners, generally in late summer. Property tax is legally due on September 1 of each year; however, property owners can pay the property tax without penalty as late as January 6 of the following year. Many property tax owners wait until the end of the calendar year to pay their property tax in order to:
- Have the use of their money for as long as possible
- Still be able to deduct the property tax payment for income tax purposes in the calendar year.
One of the most common standards for valuing property for tax purposes is called “fair market value.” In other words, the value of property for property tax purposes is supposed to be equivalent to the price at which such property would change hands between a willing buyer and a willing seller, both having full knowledge of the benefits and burdens of the property, and neither being under a compulsion to buy or sell.
While some states have an “assessment ratio” (some percentage less than 100% at which the property is taxed), most property in North Carolina is taxed at 100% of its fair market value. “Uniformity” is the other valuation standard. Uniformity simply means that like kind property must be valued in like fashion in the assessment process. While there have been a few appeal cases won on the argument that the assessment was not uniform, most property tax disputes involve whether the property was assessed at fair market value.
If you receive a property tax revaluation notice for your business that you don’t agree with, you do have the right to file for an appeal. Stay tuned for next month’s article on how to move forward with an appeal and when it may be time to call for legal backup.
Meet the Authors:
John A. Cocklereece, Jr. is a director and attorney at the Winston-Salem law firm of Bell, Davis & Pitt, P.A. His principal areas of practice are general business law, estate planning and administration, and tax law, with particular emphasis on representation of counties and taxpayers in property tax appeals. John is a former chairman of the North Carolina Property Tax Commission. He currently serves as chairman of the Forsyth County Industrial Development and Pollution Control Financing Authority, and is a member of the board of trustees of the Forsyth Tech Community College. John can be reached at [email protected].
Justin M. Hardy is a director and attorney at the Winston-Salem law firm of Bell, Davis & Pitt, P.A. His principal areas of practice are general business law, trademark, and tax law, with particular emphasis on representation of counties and taxpayers in property tax appeals. Justin serves as a member of the Tax Section Council of the North Carolina Bar Association and as a vice chair of that section’s Continuing Legal Education Committee. Justin can be reached at [email protected].
For more information about property tax in North Carolina, subscribe to our blog, The North Carolina Property Tax Law Monitor.