The North Carolina Senate this week passed a bill to help residential builders by reducing the amount of tax they would owe on unsold inventory homes.
HB 168, “Exempt Builder Inventory”, would exempt from property tax any increase in value of a single-family home or duplex held for sale by a builder, to the extent the increase is attributable to subdivision or other improvement. Model homes and homes intended for use as rental properties would NOT be exempt. Builders would have to apply annually for the exemption, and could receive it for no more than three years on each inventory home.
The Senate added a provision which would extend this exemption to land developed for commercial purposes, but this provision would end when the property is sold or a building permit is obtained or five years, whichever occurs earliest.
Currently, real property is assessed on January 1 of each year and the owner must pay taxes on the reassessed value, even on homes that are under construction and unsold. HB 168 would extend to home builders the same same tax treatment available to other manufacturers in North Carolina, which defers taxation of an inventory product at full value until such time as it is sold in the market. The builder would instead pay taxes on the value of the unimproved land or finished building lot at the time of purchase.
The bill passed the Senate 38-5, and now heads to the House for a concurrence vote next week.
REBIC joins the North Carolina Home Builders Association (NCHBA) in thanking Senator Harry Brown (R-Onslow), Senator Tommy Tucker (R-Union), and Senator Rick Gunn (R-Alamance) for their leadership in carrying this legislation through the Senate.