AN ACT to gradually increase the exemption amount under the disabled veteran property tax homestead exclusion, to allow disabled veterans to prequalify for the disabled veteran property tax homestead exclusion, to exclude the primary motor vehicle owned by a one hundred percent disabled veteran from the property tax, and to reimburse local governments for a percentage of their resulting revenue loss.

Whereas, North Carolina strives to be the most veteran‑friendly state in the nation; and

Whereas, North Carolina recognizes the sacrifices of its veterans who have become 100% permanently and totally disabled due to service‑connected conditions; and

Whereas, homeownership and reliable transportation are critical to the well‑being of disabled veterans, this act seeks to provide immediate financial relief through property tax exemptions; and

Whereas, to ensure local governments remain financially stable, this act establishes a hold harmless model to reimburse local governments up to 50% of revenue losses resulting from the implementation of this act, ensuring a shared investment between the State and local governments in honoring our disabled veterans; Now, therefore,

The General Assembly of North Carolina enacts:

PART I. DISABLED VETERAN PROPERTY TAX HOMESTEAD EXCLUSION

SECTION 1.(a)  For taxes imposed for taxable years beginning on or after July 1, 2025, G.S. 105‑277.1C reads as rewritten:

§ 105‑277.1C.  Disabled veteran property tax homestead exclusion.

(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. The first forty‑five seventy‑five thousand dollars ($45,000) ($75,000) of appraised value of the residence is excluded from taxation. A qualifying owner who receives an exclusion under this section may not receive other property tax relief.

(b)        Definitions. – The following definitions apply in this section:

(1)        Disabled veteran. – A veteran of any branch of the Armed Forces of the United States whose character of service at separation was honorable or under honorable conditions and who satisfies one of the following requirements:

a.         As of January 1 preceding the taxable year for which the exclusion allowed by this section is claimed, the veteran had received benefits under 38 U.S.C. § 2101.

b.         The veteran has received a certification by the United States Department of Veterans Affairs or another federal agency indicating that, as of January 1 preceding the taxable year for which the exclusion allowed by this section is claimed, he or she has a service‑connected, permanent, and total disability.

c.         The veteran is deceased and the United States Department of Veterans Affairs or another federal agency has certified that, as of January 1 preceding the taxable year for which the exclusion allowed by this section is claimed, the veteran's death was the result of a service‑connected condition.

(2)        Repealed by Session Laws 2009‑445, s. 22(c), effective for taxes imposed for taxable years beginning on or after July 1, 2009.

(2a)      Hold harmless amount. – The appraised value of a property excluded from taxation under subsection (a) of this section multiplied by the applicable local tax rate.

(3)        Permanent residence. – Defined in G.S. 105‑277.1.

(4)        Property tax relief. – Defined in G.S. 105‑277.1.

(4a)      Qualifying owner. – An owner, as defined in G.S. 105‑277.1, who is a North Carolina resident and one of the following:

a.         A disabled veteran.

b.         The surviving spouse of a disabled veteran who has not remarried.

(5), (6) Repealed by Session Laws 2009‑445, s. 22(c), effective for taxes imposed for taxable years beginning on or after July 1, 2009.

(7)        Service‑connected. – Defined in 38 U.S.C. § 101.

(8)        Total hold harmless amount. – The sum of the following:

a.         The hold harmless amount for all property excluded from taxation under subsection (a) of this section in the county multiplied by fifty percent (50%).

b.         The hold harmless amount for all property excluded from taxation under subsection (a) of this section in the cities located in the county multiplied by fifty percent (50%).

…

(f)        Application. – An application for the exclusion allowed under 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 exclusion is claimed. An applicant for an exclusion under this section must establish eligibility for the exclusion by providing a copy of the veteran's disability certification or evidence of benefits received under 38 U.S.C. § 2101. An assessor may accept the prequalification notice under subsection (h) of this section to establish eligibility for the exclusion provided in this section in lieu of a veteran's disability certification or evidence of benefits received under 38 U.S.C. § 2101.

(g)        Reimbursement. – On or before September 1 of each year, each county tax collector shall notify the Secretary of Revenue, in a manner prescribed by the Secretary, of the county's total hold harmless amount. A county that fails to notify the Secretary of Revenue of its total hold harmless amount by the due date is barred from receiving a reimbursement under this subsection for that taxable year. On or before December 31 of each year, the Secretary of Revenue shall distribute to each county its respective total hold harmless amount; provided, however, that if the hold harmless amount for any city or county exceeds one percent (1%) of its total general fund revenue for the most recent fiscal year, the Secretary of Revenue shall also reimburse that city or county for all amounts exceeding that threshold.

Any funds received by a county that are attributable to a city within the county must be distributed to that respective city. Any funds received by a county or city because the county or city was collecting taxes for another unit of government or special district must be credited to the funds of that other unit or district in accordance with regulations issued by the Local Government Commission.

In order to pay for the reimbursement under this section and the cost to the Department of Revenue of administering the reimbursement, the Secretary of Revenue shall draw from collections received under Part 2 of Article 4 of this Chapter an amount equal to the reimbursement and the cost of administration.

(h)        Prequalification. – A disabled veteran or the surviving spouse of a disabled veteran who has not remarried may apply for prequalification of the property tax relief provided by this section notwithstanding that the disabled veteran or the surviving spouse of a disabled veteran who has not remarried is not an owner of a permanent residence at the time that the application for prequalification is submitted. It is the intent of the General Assembly to allow taxpayers and lenders to determine, in advance of the purchase of a primary residence, the availability of the tax benefit provided by this section in order to facilitate omitting exempted amounts from determinations of payment calculations. An application for prequalification under this subsection may be filed at any time, must be submitted on a form approved by the Department, and must be accompanied by a copy of the veteran's disability certification or evidence of benefits received under 38 U.S.C. § 2101. Application forms under this subsection must be made available by the assessor. Upon receipt of an application under this subsection, the assessor of the county in which the application is filed must notify the applicant of the applicant's qualification for eligibility for property tax relief under this section within 30 days. Upon purchasing a permanent residence, an applicant who has received prequalification under this subsection must apply for the property tax relief provided by this section as required under subsection (f) of this section.

SECTION 1.(b)  For taxes imposed for taxable years beginning on or after July 1, 2026, G.S. 105‑277.1C(a), as amended by subsection (a) of this section, reads as rewritten:

(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. The first seventy-five one hundred twenty‑five thousand dollars ($75,000) ($125,000) of appraised value of the residence is excluded from taxation. A qualifying owner who receives an exclusion under this section may not receive other property tax relief.

SECTION 1.(c)  For taxes imposed for taxable years beginning on or after July 1, 2027, G.S. 105‑277.1C(a), as amended by subsection (b) of this section, reads as rewritten:

(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. The first one hundred twenty-five thousand dollars ($125,000) of amount of the appraised value of the residence equal to the exclusion amount is excluded from taxation. The exclusion amount is the lesser of five hundred thousand dollars ($500,000) or one hundred percent (100%) of the appraised value of the residence. A qualifying owner who receives an exclusion under this section may not receive other property tax relief.

PART II. DISABLED VETERAN MOTOR VEHICLE PROPERTY TAX EXEMPTION

SECTION 2.(a)  G.S. 105‑275 reads as rewritten:

§ 105‑275.  Property classified and excluded from the tax base.

The following classes of property are designated special classes under Article V, Sec. 2(2), of the North Carolina Constitution and are excluded from tax:

…

(5b)      A motor vehicle (i) owned by a person who has a one hundred percent (100%) disability rating certified by the United States Department of Veterans Affairs and (ii) used by that person as their primary personal vehicle. The exclusion provided by this subdivision shall not apply to vehicles used primarily for business or commercial purposes.

….

SECTION 2.(b)  G.S. 105‑330.4 is amended by adding a new subsection to read:

(f)       Hold Harmless Reimbursement. – On or before September 1 of each year, each county tax collector shall notify the Secretary of Revenue, in a manner prescribed by the Secretary, of the county's total hold harmless amount. A county that fails to notify the Secretary of Revenue of its total hold harmless amount by the due date is barred from receiving a reimbursement under this subsection for that taxable year. On or before December 31 of each year, the Secretary of Revenue shall distribute to each county its respective total hold harmless amount; provided, however, that if the hold harmless amount for any city or county exceeds one percent (1%) of its total general fund revenue for the most recent fiscal year, the Secretary of Revenue shall also reimburse that city or county for all amounts exceeding that threshold.

Any funds received by a county that are attributable to a city within the county must be distributed to that respective city. Any funds received by a county or city because the county or city was collecting taxes for another unit of government or special district must be credited to the funds of that other unit or district in accordance with regulations issued by the Local Government Commission.

In order to pay for the reimbursement under this subsection and the cost to the Department of Revenue of administering the reimbursement, the Secretary of Revenue shall draw from collections received under Part 2 of Article 4 of this Chapter an amount equal to the reimbursement and the cost of administration.

The following definitions apply in this subsection:

(1)        Hold harmless amount. – The appraised value of property excluded from taxation under G.S. 105‑275(5b) multiplied by the applicable local tax rate.

(2)        Total hold harmless amount. – The sum of the following:

a.         The hold harmless amount for all property excluded from taxation under G.S. 105‑275(5b) in the county multiplied by fifty percent (50%).

b.         The hold harmless amount for all property excluded from taxation under G.S. 105‑275(5b) in cities located in the county multiplied by fifty percent (50%).

SECTION 2.(c)  This section is effective when it becomes law and applies to motor vehicles registered on or after that date and to applications for motor vehicle property tax exemptions occurring on or after that date.

PART III. VETERANS' ECONOMIC DEVELOPMENT INCENTIVE GRANT PROGRAM

SECTION 3.  There is appropriated from the General Fund to the North Carolina Department of Military and Veterans Affairs the sum of ten million dollars ($10,000,000) in nonrecurring funds for the 2025‑2026 fiscal year to be used for purposes consistent with Section 3A of this act. Funds appropriated by this section shall not revert but shall remain available for purposes consistent with Section 3A of this act until expended.

SECTION 3A.(a)  Veterans' Economic Development Incentive Grant Program Established. – There is established the Veterans' Economic Development Incentive Grant Program to be administered by the North Carolina Department of Military and Veterans Affairs. The purpose of the program is to provide financial assistance in the form of grants to eligible entities to promote affordable housing initiatives for veterans, infrastructure improvements for veterans, and veteran employment programs, in accordance with this section.

SECTION 3A.(b)  Definitions. – The following definitions apply in this section:

(1)        Department. – The North Carolina Department of Military and Veterans Affairs.

(2)        Eligible entity. – Any of the following:

a.         A nonprofit organization that (i) is organized and operated primarily for the benefit and service of veterans and (ii) the Department determines demonstrates a proven track record of adequately serving the needs of veterans.

b.         Local governments pursuing veteran‑focused development initiatives, as determined by the Department.

c.         Nonprofit entities that collaborate with veterans' organizations to provide employment opportunities or housing solutions to veterans, as determined by the Department.

(3)        Local government. – A city or county, as those terms are defined in G.S. 160A‑1 and G.S. 153A‑1, respectively.

(4)        Program. – The Veterans' Economic Development Incentive Grant Program established by this section.

(5)        Qualifying project. – A project by an eligible entity that (i) meets the requirements of one or more qualifying purposes as defined in this subsection and (ii) is a singular and self‑contained project.

(6)        Qualifying purposes. – Any of the following:

a.         Affordable housing initiatives for veterans. – Programs that provide down payment assistance to veterans, home repair funding to veterans, or incentives for developers to create veteran‑focused housing.

b.         Infrastructure improvements. – Projects that improve accessibility for disabled veterans in public facilities or community spaces.

c.         Veteran employment programs. – Initiatives that offer workforce training, job placement services, or entrepreneurship support tailored to veterans.

SECTION 3A.(c)  Eligibility. – An eligible entity is eligible for a grant under the program.

SECTION 3A.(d)  Application; Verification. – An eligible entity may apply for a grant under the program. An applicant must apply to the Department on a form prescribed by the Department and must include any supporting documentation required by the Department. The Department may accept applications until the funds available under the program have been fully awarded. The Department shall consult with applicants to substantiate applications prior to awarding grants under the program.

SECTION 3A.(e)  Grant Amount. – The total grant amount per qualifying project is equal to one hundred thousand dollars ($100,000).

SECTION 3A.(f)  Eligible Uses. – Grants can be used for qualifying purposes as defined in this section.

SECTION 3A.(g)  Grant Program Limit. – The total of all funds granted under this program may not exceed the amount allocated to the program under this act and under any future act of the General Assembly. The Department must calculate the total amount of grants requested from the applications filed under subsection (d) of this section. Grants shall be awarded on a first come, first served basis.

SECTION 3A.(h)  Administrative Expenses. – The Department may retain up to five percent (5%) of the funds appropriated for the grant program established by this section for administrative expenses.

PART IV. REVIEW AND REPORTING

SECTION 4.  No later than September 1 of each year, the Department of Revenue (Department), in consultation with the Department of Military and Veterans Affairs, shall provide a report to the Joint Legislative Economic Development and Global Engagement Oversight Committee and the Fiscal Research Division that consists of the following:

(1)        An assessment of the financial impact on local governments of the provisions of this act.

(2)        Data on the number of veterans benefitting from the homestead exclusion and motor vehicle tax exemption, as modified by this act.

(3)        An evaluation of whether the Veterans' Economic Development Incentive Fund has contributed to workforce development for veterans, infrastructure improvements for veterans, and affordable housing initiatives.

PART V. EFFECTIVE DATE

SECTION 5.  Unless otherwise provided, this act is effective when it becomes law.