AN ACT to update and modify the nonprofit low‑ or moderate‑income housing property tax exemption.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 105‑278.6 reads as rewritten:

§ 105‑278.6.  Real and personal property used for charitable purposes.purposes by certain entities.

(a)        Real and personal property owned by:by an entity listed in this subsection is exempt from taxation if (i) as to real property, it is actually and exclusively occupied and used and, as to personal property, it is entirely and completely used by the owner for a charitable purpose; and (ii) the owner is not organized or operated for profit. The entities are:

(1)        A Young Men's Christian Association or similar organization;organization.

(2)        A home for the aged, sick, or infirm;infirm.

(3)        An orphanage or similar home;home.

(4)        A Society for the Prevention of Cruelty to Animals;Animals.

(5)        A reformatory or correctional institution;institution.

(6)        A monastery, convent, or nunnery;nunnery.

(7)        A nonprofit, life‑saving, first aid, or rescue squad organization;organization.

(8)        A nonprofit organization providing housing for individuals or families with low or moderate incomesincomes, other than rental housing, which is subject to G.S. 105‑278.7A.

shall be exempted from taxation if: (i) As to real property, it is actually and exclusively occupied and used, and as to personal property, it is entirely and completely used, by the owner for charitable purposes; and (ii) the owner is not organized or operated for profit.

(b)        A charitable purpose within the meaning of this section is one that has humane and philanthropic objectives; it is an activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward. The humane treatment of animals is also a charitable purpose.

(c)        The fact that a building or facility is incidentally available to and patronized by the general public, so long as there is no material amount of business or patronage with the general public, shall does not defeat the exemption granted by this section.

(d)       Notwithstanding the exclusive‑use exclusive use requirements of this section, if part of a property that otherwise meets the section's requirements is used for a purpose that would require exemption under subsection (a), above, if the entire property were so used, the valuation of the part so used shall be exempted is exempt from taxation.

(e)        Real property held by an organization described in subdivision (a)(8) for a charitable purpose under this section as a future site for housing housing, other than affordable rental housing as defined in G.S. 105‑278.7A, for individuals or families with low or moderate incomes may be classified under this section for no more than 10 five years. The taxes that would otherwise be due on real property exempt under this subsection shall be are a lien on the property as provided in G.S. 105‑355(a). The taxes shall be are carried forward in the records of the taxing unit as deferred taxes. The deferred taxes 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. A disqualifying event occurs when the property was is not used for low‑ or moderate‑income housing within 10 five years from the first day of the fiscal year the property was classified under this subsection. In addition to the provisions in G.S. 105‑277.1F, all liens arising under this subdivision are extinguished when the property is used for low‑ or moderate‑income housing within the time period allowed under this subsection.

SECTION 2.  Article 12 of Chapter 105 of the General Statutes is amended by adding the following new section to read:

§ 105‑278.7A.  Real and personal property owned, in whole or in part, by a charitable nonprofit and used for affordable rental housing.

(a)        Exemption Generally. – Real and personal property owned by an eligible owner and used for a charitable purpose in the operation of affordable rental housing is exempt from taxation to the extent provided in this section if the requirements of this section are met.

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

(1)        Affiliate. – Defined in G.S. 105‑130.2.

(2)        Affordable rental housing. – A rental housing development consisting of land and improvements in which more than fifty percent (50%) of the units are qualifying units.

(3)        Charitable purpose. – A charitable purpose within the meaning of this section is one that has humane and philanthropic objectives; it is an activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward.

(4)        Eligible joint venture. – A limited partnership, limited liability company, or limited liability partnership in which a general partner or limited liability company managing member is an eligible nonprofit corporation.

(5)        Eligible nonprofit corporation. – A nonprofit described in section 501(c)(3) of the Code that (i) is exempt from federal income taxation under section 501(a) of the Code, (ii) is incorporated under a certificate of existence or admitted under a certificate of authority under the North Carolina Nonprofit Corporation Act as provided in Chapter 55A of the General Statutes, and (iii) has day‑to‑day control of the operations of and decisions for the affordable rental housing and has not delegated any decision‑making authority other than to a property manager serving under the direction of the eligible owner. The term includes a single‑purpose entity wholly owned by an eligible nonprofit corporation.

(6)        Eligible owner. – An eligible joint venture or an eligible nonprofit corporation.

(7)        Income limit. – Eighty percent (80%) of area median income, adjusted for family size, as set and most recently published by the U.S. Department of Housing and Urban Development.

(8)        Qualifying unit. – An affordable rental housing unit for which both of the following conditions are met:

a.         The rent charged for an occupied unit or the published rent for a vacant unit is at or below the rent limit.

b.         It is occupied by, or set aside for, a tenant whose income is at or below the income limit.

(9)        Rent limit. – Rent, plus a utility allowance calculated in accordance with the requirements of the North Carolina Housing Finance Agency, that does not exceed thirty percent (30%) of the income limit.

(c)        Requirements for Government‑Supported Affordable Rental Housing. – Real and personal property that provides government‑supported affordable rental housing is exempt from property taxation in any year in which all of the conditions listed in this subsection are met. For purposes of this section, the term government‑supported means that the property is financed as described in sub‑subdivision a. or b. of subdivision (2) of this subsection. The conditions are:

(1)        The property is owned and operated by an eligible nonprofit corporation or an eligible joint venture.

(2)        Either of the following applies:

a.         The eligible owner is an eligible joint venture that receives low‑income housing credits pursuant to section 42 of the Code and that is in compliance with any applicable regulatory requirements as determined by the North Carolina Housing Finance Agency. Ownership is determined as of the date the certificate of occupancy is issued.

b.         The eligible owner finances the acquisition, rehabilitation, development, or operation of the property, or any combination thereof, with tax‑exempt mortgage revenue bonds, qualified 501(c)(3) bonds, federal direct loans or grants, State loans or grants, or loans or grants provided by a local jurisdiction in which the property is located. Such government support must require the execution of a deed restriction or enforceable, verifiable agreement with a public agency requiring that the property be operated as affordable rental housing in accordance with this section for a period of at least 15 years from the date the financing or financial assistance was initially provided. Government support does not include payments made to the owner under the federal Housing Choice Voucher Program or other local, State, or federal voucher program.

(d)       Requirements for Non‑Government‑Supported Affordable Rental Housing. – Real and personal property that provides non‑government‑supported affordable rental housing is exempt from property taxation in any year in which all of the conditions listed in this subsection are met. For purposes of this subsection, the term non‑government‑supported means that the property is not financed as described in sub‑subdivision a. or b. of subdivision (2) of subsection (c) of this section. The conditions are:

(1)        The property is one hundred percent (100%) owned and operated by an eligible nonprofit corporation that has owned and operated affordable rental housing for at least five years.

(2)        The eligible nonprofit corporation, including any of its subsidiaries or nonprofit affiliates, does not receive any funding or financial assistance, other than grants, from a for‑profit affiliate.

(3)        The eligible nonprofit corporation does not lease the affordable rental housing land or improvements to another entity. This subdivision does not apply to the leasing of affordable rental housing units to tenants.

(4)        The eligible nonprofit corporation has executed a deed restriction in favor of the county and any municipality in which the property is located requiring that the property be operated as affordable rental housing in accordance with this section for a period of at least 15 years from the date of application. The restriction must require that the owner provide the reporting required under subsection (g) of this section annually to all grantees for the term of the deed restriction. The deed restriction must state that any grantee, or its assigns, has the right to enforce the terms of the restriction.

(e)        Exemption Amount. – The exemption amount is the percentage of the appraised value that is equal to the percentage of qualifying units unless the eligible owner meets the requirements of the safe harbor in Section 3 of Internal Revenue Service Rev. Proc. 96‑32, in which case the exemption amount is one hundred percent (100%) of the appraised value of the property. A transition period of one taxable year applies to improved and occupied rental housing property purchased by an eligible owner for which the eligible owner cannot provide the total household income for each qualifying unit at the time of application but that otherwise meets the requirements of this section. During the transition period, a qualifying unit is an affordable rental housing unit for which the rent charged is at or below the rent limit for purposes of determining the exemption amount.

(f)        Application. – To be eligible for an exemption under this section, an eligible owner must submit an application in accordance with G.S. 105‑282.1. The application form shall require the applicant to provide the following information:

(1)        Whether the applicant is applying for the exemption under subsection (c) or subsection (d) of this section, along with documentation supporting that the applicant is an eligible owner for the subsection under which it is applying; evidence of government support pursuant to sub‑subdivision a. or b. of subdivision (2) of subsection (c) of this section, if applicable; and a copy of the applicable deed restriction or regulatory agreement.

(2)        Whether the property is subject to a transition period as described in subsection (e) of this section.

(3)        Either of the following, as of the last day of the month immediately preceding January 1 of the year of application:

a.         If the applicant is applying for an exemption amount based on the percentage of qualifying units, the percentage of qualifying units by providing the following items:

1.         The rent amount received by the owner for each qualifying unit as evidenced by an anonymized rent roll. The applicant must provide evidence of the published rent if a unit is vacant.

2.         The total household income for each occupied qualifying unit, except during the transition period, evidenced in an anonymized manner.

b.         If the applicant is applying for an exemption amount based on meeting the requirements of the safe harbor in Section 3 of Internal Revenue Service Rev. Proc. 96‑32, evidence demonstrating the affordable rental housing meets those requirements.

(4)        Certification that the applicant is in compliance with any applicable deed restriction or regulatory agreement and the requirements of this section.

(g)        Compliance. – An eligible owner that has been granted an exemption under this section must, on an annual basis by January 31 following the initial exemption, certify that it remains in compliance with this section and provide to the taxing unit the items listed in subdivision (3) of subsection (f) of this section, as of the previous December 31, including any supporting documentation required by the taxing unit. Failure to meet these requirements within the time limits subjects the property to discovery under G.S. 105‑312. For purposes of satisfying this requirement, the household income provided for each qualifying unit must be verified every two years following initial verification of the tenant's income.

(h)        Future Site. – Real property held by an eligible owner as a future site for affordable rental housing may be classified under this section for no more than five years. The taxes that would otherwise be due on real property exempt under this subsection are a lien on the property as provided in G.S. 105‑355(a). The taxes shall be carried forward in the records of the taxing unit as deferred taxes. The deferred taxes 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. A disqualifying event occurs when the property is not used for affordable rental housing that is in compliance with this section within five years from the first day of the fiscal year the property was classified under this subsection. In addition to the provisions in G.S. 105‑277.1F, all liens arising under this subsection are extinguished when the property is used for affordable rental housing within the time period allowed under this subsection. For purposes of this subsection, the term future site means unimproved real property or improved real property that is not occupied as of the date of the application for exemption under this section.

(i)         Ineligible Property. – Property that has been designated a special class of property under G.S. 105‑277.16 and assessed accordingly is not eligible for exemption under this section.

SECTION 3.  G.S. 105‑277.1F(a) reads as rewritten:

(a)      Scope. – This section applies to the following deferred tax programs:

(1)        G.S. 105‑275(12), real property owned by a nonprofit corporation held as a protected natural area.

(1a)      G.S. 105‑275(29a), historic district property held as future site of historic structure.

(2)        G.S. 105‑277.1B, the property tax homestead circuit breaker.

(2a)      (See note for repeal) G.S. 105‑277.1D, the inventory property tax deferral.

(3)        G.S. 105‑277.4(c), present‑use value property.

(4)        G.S. 105‑277.14, working waterfront property.

(4a)      G.S. 105‑277.15, wildlife conservation land.

(4b)      G.S. 105‑277.15A, site infrastructure land.

(5)        G.S. 105‑278(b), historic property.

(6)        G.S. 105‑278.6(e), nonprofit property held as future site of low‑ or moderate‑income housing.housing, other than affordable rental housing as defined under G.S. 105‑278.7A.

(7)        G.S. 105‑278.7A(h), nonprofit property held as future site of affordable rental housing.

SECTION 4.  This act is effective for taxes imposed for taxable years beginning on or after July 1, 2026, and, with respect to property held as a future site under G.S. 105‑278.6(e) or G.S. 105‑278.7A(h), as enacted by this act, applies to real property classified under those provisions on or after that date. Notwithstanding G.S. 105‑282.1(a)(2)a., an owner of low‑ or moderate‑income rental housing property that is exempt under G.S. 105‑278.6(a)(8) as of the effective date of this act must, by December 31, 2026, reapply for the exemption, providing the assessor of the taxing unit with any necessary documentation for compliance consistent with this act. Reapplication under this section is considered an application under G.S. 105‑278.7A(f), as enacted by this act. Failure to meet this requirement within the time limit subjects the property to discovery under G.S. 105‑312.