AN ACT to modify the income eligibility limit for the elderly or disabled property tax homestead exclusion for married couples, to eliminate the deferred tax liability under the property tax homestead circuit breaker, and to expand the property tax homestead circuit breaker by providing an alternate means to qualify based on area median income.

The General Assembly of North Carolina enacts:

SECTION 1.(a)  G.S. 105‑277.1 is amended by adding a new subsection to read:

(a3)    Spousal Income Limitation. – Married applicants residing with their spouses may qualify for the property tax homestead exclusion provided in this section if their income does not exceed one hundred fifteen percent (115%) of the income eligibility limit determined under subsection (a2) of this section.

SECTION 1.(b)  G.S. 105‑277.1B reads as rewritten:

§ 105‑277.1B.  Property tax homestead circuit breaker.

(a)        Classification. – A permanent residence owned and occupied by a qualifying owner is designated a special class of property under Article V, Section 2(2) of the North Carolina Constitution and is taxable in accordance with this section.

(b)        Definitions. – The definitions provided in G.S. 105‑277.1 apply to this section.

(c)        Income Eligibility Limit. – The income eligibility limit provided in G.S. 105‑277.1(a2) applies to this section.

(c1)      AMI Limit. – Seventy percent (70%) of the area median income for a household of two persons in the county in which the property is located, as determined by the most recent figure reported by the United States Department of Housing and Urban Development as of January 1 preceding the taxable year for which the benefit is claimed.

(d)       Qualifying Owner. – For the purpose of qualifying for the property tax homestead circuit breaker under this section, a qualifying owner is an owner who meets all of the following requirements as of January 1 preceding the taxable year for which the benefit is claimed:

(1)        The owner has an income for the preceding calendar year of not more than one hundred fifty percent (150%) of the income eligibility limit specified maximum amount authorized in subsection (c) subsection (f) or (f1) of this section.section, as applicable.

(2)        The owner has owned and occupied the property as a permanent residence for at least five consecutive years and has occupied the property as a permanent residence for at least five years.the required amount of time under subsection (f) or (f1) of this section, as applicable.

(3)        The owner is at least 65 years of age or totally and permanently disabled.

(4)        The owner is a North Carolina resident.

(e)        Multiple Owners. – A permanent residence owned and occupied by husband and wife is entitled to the full benefit of the property tax homestead circuit breaker notwithstanding that only one of them meets the length of occupancy and ownership requirements and the age or disability requirement of this section. When a permanent residence is owned and occupied by two or more persons other than husband and wife, no property tax homestead circuit breaker is allowed unless all of the owners qualify and elect to defer taxes under this section.

(f)        General Tax Limitation. – A qualifying owner may defer that has owned the property as a permanent residence for at least five consecutive years and has occupied the property as a permanent residence for at least five years is relieved of the portion of the principal amount of tax that is imposed for the current tax year on his or her permanent residence and exceeds the percentage of the qualifying owner's income set out in the table in this subsection. If a permanent residence is subject to tax by more than one taxing unit and the total tax liability exceeds the tax limit imposed by this section, then both the taxes due under this section and the taxes deferred under this section must be apportioned among the taxing units based upon the ratio each taxing unit's tax rate bears to the total tax rate of all units.

Income Over                                  Income Up To                                          Percentage

      ‑0‑                                             Income Eligibility Limit                                4.0%

Income Eligibility Limit                 150% of Income Eligibility Limit                  5.0%

(f1)      Alternate Tax Limitation. – A qualifying owner that has owned the property as a permanent residence for at least 10 consecutive years and has occupied the property as a permanent residence for at least 10 years is relieved of the portion of the principal amount of tax that is imposed for the current tax year on his or her permanent residence and exceeds the percentage of the qualifying owner's income set out in the table in this subsection. If a permanent residence is subject to tax by more than one taxing unit and the total tax liability exceeds the tax limit imposed by this section, then the taxes due under this section must be apportioned among the taxing units based upon the ratio each taxing unit's tax rate bears to the total tax rate of all units. If the AMI Limit is less than or equal to one hundred fifty percent (150%) of the Income Eligibility Limit, a qualifying owner shall receive the benefit under subsection (f) of this section.

Income Over                                  Income Up To                                          Percentage

150% of Income Eligibility Limit  AMI Limit                                                      6.0%

(g)        Temporary Absence. – An otherwise qualifying owner does not lose the benefit of this circuit breaker because of a temporary absence from his or her permanent residence for reasons of health, or because of an extended absence while confined to a rest home or nursing home, so long as the residence is unoccupied or occupied by the owner's spouse or other dependent.

(h)        Deferred Taxes. – The difference between the taxes due under this section and the taxes that would have been payable in the absence of this section are a lien on the real property of the taxpayer as provided in G.S. 105‑355(a). The difference in taxes must be carried forward in the records of each taxing unit as deferred taxes. The deferred taxes for the preceding three fiscal years are due and payable in accordance with G.S. 105‑277.1F when the property loses its eligibility for deferral as a result of a disqualifying event described in subsection (i) of this section. On or before September 1 of each year, the collector must send to the mailing address of a residence on which taxes have been deferred a notice stating the amount of deferred taxes and interest that would be due and payable upon the occurrence of a disqualifying event.

(i)         Disqualifying Events. – A property receiving the benefit under this section loses its eligibility for the benefit as a result of a disqualifying event. The tax for the fiscal year that begins in the calendar year in which the disqualifying event occurs is computed as if the property had not been classified for the property tax benefit under this section for that year. Each of the following constitutes a disqualifying event:

(1)        The owner transfers the residence. Transfer of the residence is not a disqualifying event if (i) the owner transfers the residence to a co‑owner of the residence or, as part of a divorce proceeding, to his or her spouse and (ii) that individual occupies or continues to occupy the property as his or her permanent residence.

(2)        The owner dies. Death of the owner is not a disqualifying event if (i) the owner's share passes to a co‑owner of the residence or to his or her spouse and (ii) that individual occupies or continues to occupy the property as his or her permanent residence.

(3)        The owner ceases to use the property as a permanent residence.

(j)         Gap in Deferral. – If an owner of a residence on which taxes have been deferred under this section is not eligible for continued deferral for a tax year, the deferred taxes are carried forward and are not due and payable until a disqualifying event occurs. If the owner of the residence qualifies for deferral after one or more years in which he or she did not qualify for deferral and a disqualifying event occurs, the years in which the owner did not qualify are disregarded in determining the preceding three years for which the deferred taxes are due and payable.

(k)        Repealed by Session Laws 2008‑35, s. 1.2, effective July 1, 2008.

(l)         Creditor Limitations. – A mortgagee or trustee that elects to pay any tax deferred by the owner of a residence subject to a mortgage or deed of trust does not acquire a right to foreclose as a result of the election. Except for requirements dictated by federal law or regulation, any provision in a mortgage, deed of trust, or other agreement that prohibits the owner from deferring taxes on property under this section is void.

(m)       Construction. – This section does not affect the attachment of a lien for personal property taxes against a tax‑deferred residence.

(n)        Application. – An application for property tax relief provided by this section should be filed during the regular listing period, but may be filed and must be accepted at any time up to and through June 1 preceding the tax year for which the relief is claimed. Persons may apply for this property tax relief by entering the appropriate information on a form made available by the assessor under G.S. 105‑282.1.

SECTION 1.(c)  G.S. 105‑282.1(a) is amended by adding a new subdivision to read:

(3)      Triennial application required. – An owner of a property eligible for the property tax homestead circuit breaker under G.S. 105‑277.1B must file an application for the benefit to receive it. Once the application has been approved, the owner is entitled to the benefit for the current tax year and the two subsequent tax years thereafter unless the property loses its eligibility for the benefit as a result of a disqualifying event under G.S. 105‑277.1B(i).

SECTION 1.(d)  G.S. 105‑277.1F(a)(2) is repealed.

SECTION 1.(e)  G.S. 105‑365.1(a)(3) is repealed.

SECTION 1.(f)  G.S. 153A‑148.1 reads as rewritten:

§ 153A‑148.1.  Disclosure of certain information prohibited.

(a)        Disclosure Prohibited. – Notwithstanding Chapter 132 of the General Statutes or any other law regarding access to public records, local tax records that contain information about a taxpayer's income or receipts are not public records. A current or former officer, employee, or agent of a county who in the course of service to or employment by the county has access to information about the amount of a taxpayer's income or receipts may not disclose the information to any other person unless the disclosure is made for one of the following purposes:

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(6)        To include on a property tax receipt the amount of property taxes due and the amount of property taxes deferred on a residence classified under G.S. 105‑277.1B, the property tax homestead circuit breaker.

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SECTION 1.(g)  G.S. 160A‑208.1 reads as rewritten:

§ 160A‑208.1.  Disclosure of certain information prohibited.

(a)        Disclosure Prohibited. – Notwithstanding Chapter 132 of the General Statutes or any other law regarding access to public records, local tax records that contain information about a taxpayer's income or receipts are not public records. A current or former officer, employee, or agent of a city who in the course of service to or employment by the city has access to information about the amount of a taxpayer's income or receipts may not disclose the information to any other person unless the disclosure is made for one of the following purposes:

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(4)        To include on a property tax receipt the amount of property taxes due and the amount of property taxes deferred on a residence classified under G.S. 105‑277.1B, the property tax homestead circuit breaker.

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SECTION 2.  Notwithstanding G.S. 105‑380 and G.S. 105‑381, the governing body of a taxing unit shall release the unpaid deferred taxes under G.S. 105‑277.1B on any property for which a disqualifying event has not occurred. Any lien under G.S. 105‑355(a) corresponding to the released deferred taxes is also extinguished.

SECTION 3.  Section 1 of this act is effective for taxable years beginning on or after July 1, 2026. The remainder of this act is effective July 1, 2026.