Homes in Southeast Raleigh. (Photo: Greg Childress/NC Newsline)
Southeast Raleigh homeowner Anthony Pope fought long and hard to qualify for one of the state’s senior citizen property tax exclusions. When Pope finally got it, his property tax bill dropped from $4,600 to roughly $2,000 a year.
Like many seniors on fixed incomes, Pope was feeling the pinch of rising property taxes that some say make homes unaffordable.
Anthony Pope addresses workshop attendees in 2024. (Photo: Greg Childress/NC Newsline)“It’s definitely been a big help for me,” Pope said.
Those concerns have caught the attention of lawmakers in Raleigh, prompting leaders of the state House and Senate to launch committees to review factors contributing to high property taxes and identify ways to reduce the burden on homeowners.
State Senate Leader Phil Berger (R-Rockingham) also announced recently he will introduce legislation during the short session to halt property tax revaluation change for one year while the legislature “examines and adopts” property tax reforms.
That signals that a permanent solution to the problem is likely to be at least a year away.
“North Carolinians are shouldering the burden of massive increases in local budgets,” Berger said. “A moratorium will be the first step in making much-needed reforms to property taxes in our state.”
Lawmakers have begun to push reforms to the state’s homestead exclusions, such as increasing income limits, to make them accessible to more homeowners.
“They [seniors] cannot afford the property tax bills for the home that they have owned for decades and paid off,” State Rep. Erin Paré (R-Wake) told NC Newsline.
Rep. Erin Paré (Photo: NCGA)“They’ve had to make difficult decisions between the things that they need to buy to live, like their prescription drugs and paying gigantic property tax bills.”
North Carolina currently offers three property tax relief programs for qualified homeowners that are administered by counties:
The Elderly/Disabled Homestead Exemption is for residents 65 years or older or those who are totally and permanently disabled. The program excludes from taxes the greater of $25,000 or 50% of the assessed value of the owner’s permanent residence. To qualify, income for the preceding year must be $38,800 or less, including both incomes for a married couple. The “Circuit Breaker” limits the amount of annual property taxes the owner pays on their permanent residence. Eligibility is limited to homeowners who are 65 and older or who are totally and permanently disabled. The tax bill is limited to a fixed percentage of income, and any taxes owed above that limit are deferred until a “disqualifying event” such as the owner’s death. This program requires a new application to be filed every year. Income for both an applicant and spouse cannot exceed $58,200. The Disabled Veteran Exclusion excludes up to the first $45,000 of the appraised value of the permanent residence of a disabled veteran who has a total and permanent service-connected disability or who received benefits for specially adapted housing. There is no age or income limitation for this program.Paré filed House Bill 59 last year to expand eligibility for homestead exclusions. The bill is one of several filed targeting high property tax rates, but none have yet made it into law.
H59 would increase the income eligibility limit for married couples applying for the homestead exclusion to 115% of the existing limit, introduce a new qualification method based on area median income (AMI), and eliminate the previous system of deferring property taxes under the circuit breaker.
Paré co-chairs the House Select Committee on Property Tax Reduction and Reform formed by House Speaker Destin Hall (R-Caldwell) to review local property taxes. Senate Leader Berger formed a similar committee.
“There’s a lot of different proposals right now that are being gathered from all members of the [House] committee that will hopefully end up in one piece of legislation,” Paré said.
As NC Newsline previously reported, a proposal floated by the Tax Foundation during a recent meeting of the House property tax reform committee would cap how much revenue local governments can collect from existing properties each year. Under the “levy limit,” new construction would be exempted.
The Tax Foundation is a conservative-leaning organization that promotes tax reductions. It ranks states based on their tax systems.
Such proposals have county officials worried.
Kevin Leonard (Photo: NC Association of County Commissioners)“We’re opposed to these pieces of legislation unless the state makes up for the monies that they are going to be taking away from county governments,” said Kevin Leonard, executive director at the N.C. Association of County Commissioners.
In a recent paper, Riley Judd, who works on The Pew Charitable Trusts’ Fiscal 50 Project, which tracks state trends in long-term financial health, concurred with Leonard’s assessment.
“Without sustainable replacements or backfill mechanisms, such measures can put some critical services at risk and threaten the financial stability of local governments,” Judd said.
Meanwhile, Leonard noted that most county expenditures — 70% to 75% — are for state-mandated services. Those services include public schools, public safety and human services, he said.
“Any pressure that the General Assembly places on revenue is going to impact the ability for a county to pay for mandated services,” Leonard said.
As the cost of those services rise over time, unless the state gives counties money for them, counties either have to increase property taxes or reduce services, Leonard said.
“It’s like a balloon,” Leonard said. “You squeeze here, it’s going to come out there.”
Leonard added that one-size-fits-all solutions will not serve the state well.“You need the ability for counties to be flexible … that’s one of the reasons why you elect county commissioners.”
Joy Hicks, director of advocacy and policy at the commissioners’ association, said they’re closely watching Senate Bill 349, introduced by Sen. Brad Overcash (R-Gaston). Like Paré’s bill, S349 would end the “marriage penalty” by increasing income limits for married couples, and end the tax deferment for the circuit breaker, which some seniors dislike because it burdens heirs with repaying the taxes.
Joy Hicks (Photo: NC Association of County Commissioners)“Both are things that make it harder for some people to be able to get into those programs,” Hicks said. “We’re definitely taking a look at those things to see if those are things that we can support.”
Anthony Pope also has some ideas for improving homestead exclusion programs.
He was denied the exclusion at first because the family home he lives in has two names on the deed – Pope’s and his sister’s. The circuit breaker requires all owners to have owned and occupied the residence the previous five years. Pope said his sister received a circuit breaker exclusion for a separate home she owns and lives in.
After arguing his case before the North Carolina Board of Equalization and Review, Pope was granted the circuit breaker. Pope is unsure why he was granted the exclusion but believes the eligibility requirements are open to interpretation.
“I don’t care what reason they came up with, but they approved me for it for the last two years,” Pope said.
The provision requiring all people on a deed to have lived in a residence for the past five years and also qualify for the circuit breaker exclusion should be stripped from the eligibility requirements, Pope said.
“I say that’s ridiculous because [for] most heirs’ property, in particular Black heirs’ property, you may have several people on the deed,” Pope said. “Do you realistically expect all of those people to have lived in the house the last five years?”
Pope, the founder of Men of Southeast Raleigh, works with several organizations and nonprofits to educate residents about tax relief programs available to them and other strategies to reduce property taxes, including filing appeals with county tax offices.
The process should be easier, Pope said.
“Everything is computerized and a lot of the elderly residents do not know how to do it [file appeals and fill out applications] on a computer and they just give up and pay the taxes,” Pope said.
He also said income restrictions should be increased to allow more people to take advantage of exclusions.
“People who are receiving Social Security benefits and also a pension, they’re probably going to be over that limit but still struggle to pay property taxes,” Pope said.
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