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Builders Property Tax Exclusion

Exclusion for Improvements to Residential and Commercial Property
(N.C.G.S. 105-277.02)

The new exclusion for 2017 applies only to property owners who qualify as builders. That term is defined by North Carolina General Statute to mean, "a taxpayer engaged in the business of buying real property, making improvements to it, and reselling it." (N.C.G.S. 105-273(3a)

For both residential and commercial properties, the new exclusion exempts improvements made on or after January 1, 2016, and applied to taxes levied for tax years beginning on or after July 1, 2016. Those restrictions eliminate from eligibility any residential and commercial improvements that existed as of January 1, 2016, but improvements made after January 1, 2016, may qualify for the exclusion for tax years 2017 and beyond. Because the exclusion is aimed at new construction, renovations or improvements made to an existing residence cannot qualify.

A builder must submit a Builder Property Tax Exemption Application annually. Completed applications must be filed with the Tax Department during the regular listing period which is from January 1st through January 31st of each year. An application must be submitted for each land or building improvement for which you a claiming exemption.

Applications are available on line at FORM AV-65 - 2017 or by calling the Cumberland County Tax Department at 910-678-7559.

When real property is transferred from an exempt or partially exempt owner to a taxable owner prior to July 1st, that property is taxable for the entire year as if the taxable owner owned the property as of January 1st.

Residential Property

Residential property is considered real property that is intended to be sold and used as an individual’s residence immediately or after construction of a residence.

The Exemption excludes from taxation the increase in property value attributable to:

  1. Subdivision of a parcel for future residential construction.
  2. Non-structural improvements (grading, street, utilities, etc.) for future residential construction.
  3. Construction of a new single-family home or duplex.

To be eligible, the property must continue to be owned by a builder, be held for sale, must not be occupied by a tenant, and must not be used as a model home or for any other commercial purposes. The exclusion is limited to three years from the date the property was first subject to be listed by the builder. Remember that improvements must be as of January 1, regardless of the stage of completion. If a property is improved in stages, each improvement might qualify for a separate exclusion based on its own listing date.

Commercial Property

Commercial property is considered real property that is intended to be sold and used for commercial purposes immediately or after improvement.

Unlike residential property, commercial property may benefit from the new exclusion for a maximum of five years, but the commercial property exclusion covers only the increase in value attributable to subdivision or non-structural improvements (grading, streets, utilities, etc.). Any improvement that requires the issuance of a building permit terminates eligibility for the exclusion.

NOTE: The builder must apply for any exclusion/exemption under this statute annually. The exemption will not automatically carry from one year to another.

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Cumberland County, NC.
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