North Carolina may grant tax relief to homebuilders, reducing property taxes on unsold homes

North Carolina may grant tax relief to homebuilders, reducing property taxes on unsold homes

Under a proposed law, North Carolina homebuilders will find their tax burden eased, with a drastic reduction on taxes of homes which have been built but not yet sold. The measure is intended as an economic stimulus, providing an incentive for continued growth in the homebuilding industry.

Currently, builders pay taxes based on the combined value of the property and the house. If the proposal passes, builders would pay taxes on the value of the property alone.

Some officials oppose the bill, stating that vacant houses still require public services, such as fire and police. Mike Carpenter, an executive vice president with the N.C. Home Builders Association, disagrees.

“An unoccupied home has fewer demands for public services than an occupied home. Nobody’s going to school from an unoccupied home,” Carpenter said. “There may be a need for police and fire protection, but … what’s continued to be collected once this bill becomes law would be adequate to cover those services.”

The proposed law, which has already passed the state House, is being compared to other local stimulus incentive programs. “It’s not unlike the incentive that was given to Chiquita when they moved here,” says Charlotte homebuilder Alan Banks, “because homebuilding creates jobs.” He added that he would save $750 to $1,250 per house if the law passes, and would therefore be able to build more.

The bill passed in the House by an overwhelming majority of 110 – 7, despite objections of some Charlotte, NC officials. Dana Fenton, city of Charlotte lobbyist, criticized the proposal, although he did not have an estimate for how much it would cost the city. Mecklenburg County lobbyist Brian Francis agreed, adding, “We are concerned about any legislation that erodes the tax base and reduces the number of taxpayers who share in the cost of government.”

The North Carolina Home Builders Association’s political action committee counters with estimates that this measure will create 2,000 jobs, boost the number of new homes for sale by about 500, and add hundreds of taxpayers to the state when they eventually buy the houses.

Carpenter pointed out that the bill is modeled after South Carolina law.

The HBA PAC donations to political candidates soared in the fourth quarter of 2014. Carpenter explains that the increase was a reflection of the election season, not a push for this measure. Some lawmakers who supported the bill were HBA PAC recipients, while others were not. N.C. Rep. Rodney Moore, a Charlotte Democrat, was a sponsor of the bill, but did not receive any HBA PAC contributions to his most recent campaign.

“This particular bill made sense,” Moore said. “It’s hard to tax property that hasn’t been sold.”

When the state exempted all business inventory from taxation in 1987, including motor vehicles, homes were not considered inventory. Brian Pace of Charlotte’s Pace Development Group said, “No other industry is forced to pay taxes at the full value of something it is manufacturing until such a time as it is sold. This change is long overdue.”

The law was approved by the state House on June 17th. Proponents of the measure expect the state Senate to pass the bill.

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