HomeMy WebLinkAboutAgenda - 06-05-2018 8-d - Refund Request – Sports Endeavors, Inc.
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: June 5, 2018
Action Agenda
Item No. 8-d
SUBJECT: Refund Request – Sports Endeavors, Inc.
DEPARTMENT: Tax Administration
ATTACHMENT(S):
Memorandum
Weyerhaeuser Case
Redevelopment Commission Case
Wesleyan Case
North Carolina General Statute 105-
282.1, 105-275(40)
2014 Listing Form Instructions
Sports Endeavors April 3, 2018 Refund
Request Cover Letter
Refund Resolution (Denial)
INFORMATION CONTACT:
Dwane Brinson, Tax Administrator,
(919) 245-2726
John Roberts, County Attorney, (919)
245-2518
PURPOSE: To consider adoption of a resolution regarding denial of a refund request submitted
by Sports Endeavors, Inc.
BACKGROUND: Beginning with tax year 2014 the North Carolina General Assembly passed
legislation exempting certain aspects of computer software. The specific bill was Senate Bill
490 and is attached hereto. Sports Endeavors, Inc. claims to have listed potentially exempt
property during the annual listing process for tax year 2014, 2015, 2016 and 2017. The property
on its listing form was not identified to the Orange County Tax Office nor labeled in any way to
prompt further research by staff. Moreover, if exempt property per Senate Bill 490 were listed
by Sports Endeavors Inc., it was done against the revised listing form instructions provided
annually. A memorandum is attached that provides further detail on this case.
FINANCIAL IMPACT: Approval of the refund request would result in a $1,220,691.92 refund.
SOCIAL JUSTICE IMPACT: There is no Orange County Social Justice Goal impact associated
with this item.
RECOMMENDATION(S): The Manager recommends that the Board approve the attached
resolution to deny the Sports Endeavors’ refund request based on statutory language and case
law as provided.
1
fir
ORANGE COUNTY TAX ADMINISTRATION
228 S CHURTON STREET, SUITE 200, PO BOX 8181
HILLSBOROUGH, NORTH CAROLINA 27278
Telephone (919) 245 -2100 Fax (919) 644 -3332
T. Dwane Brinson, Director
Memorandum
To: Orange County Board of Commissioners
Cc: Bonnie Hammersley, County Manager
Travis Myren, Deputy County Manager
John Roberts, County Attorney
From: Dwane Brinson, Tax Administrator-
Date: May 23, 2018
Re: Refund Request: Sports Endeavors Inc.
On Tuesday, April 3, 2018 the Orange County Tax Office received a refund request from Sports
Endeavors Inc (SEI). The refund request totaled approximately $1,200,000 and was based on a
claim that SEI had been taxed on millions of dollars of non - taxable software pursuant to a law
change for tax year 2014. By law the Board has 90 days to respond to this request. Should the
Board deny the refund SEI's legal remedy is to bring suit against the County within three years
of the expiration of the 90 -day period. This memorandum provides details of the case and
support for the Orange County Tax Administrator's and Orange County Attorney's
recommendation to deny the refund request.
Background
The North Carolina General Assembly passed Senate Bill 490, which went into effect for tax
year 2014. This bill, in summary, excludes certain customized computer software from property
tax. Beginning with tax year 2014, the Orange County Tax Office (hereinafter "tax office ")
proactively modified its annual listing form instructions to advise taxpayers of the law change.
Specifically, the tax office added the following note in bold font: "Note: The dei,eloprnent cost of
sofiware or any modification cost to sofN)are, whether done internally or externally by a third
party to meet the customer's specified needs is excluded and should not be reported. "
3
It is alleged that SEI listed non- taxable software beginning with its 2013 property tax listing all
the way through 2017. In the request for refund, it is interpreted that SEI commingled taxable
and non - taxable property in its listing under the item "SAP ". SEI filed no appeal, discussed no
issues and paid the tax due on the property voluntarily and without objection or compulsion.
In addition, a professional business auditing firm that has long been contracted with Orange
County to perform random audit assignments of accounts listing business personal property
greater than $100,000 conducted an audit of SEI. This audit occurred in 2014, the first year the
new law took effect. As identified by SEI, the professional auditor assigned to this account
found no non - taxable equipment on the schedules. Moreover, SEI agreed completely to the
findings and outcome of the audit including all equipment as listed for the 2014 tax year.
Legality
Based on North Carolina law, both statutory and case law, and a review of this case as it relates
to such, I believe there to be issues with this refund request that prevent the Board of
Commissioners from granting the request. Statutory language and supporting case law are
provided below. Identified cases have been summarized here, but a complete copy of each is
provided as an exhibit.
Weyerhaeuser Co v. 0-aven County
This case, while not directly on point, is instructive in several aspects of the SEI request.
Craven County commenced a discovery process and discovered property for prior years.
Pollution abatement equipment was part of the discovery. Under G.S. 105- 282.1(c) the county
allowed the exemption on the pollution abatement equipment. The taxpayer realized after the
discovery was issued that it had listed and paid taxes on other pollution abatement equipment.
The taxpayer made application for exemption for prior years and the county denied the
application. The North Carolina Property Tax Commission upheld the county's decision and the
Court of Appeals agreed. The Court stated "In this case, however, appellant stipulated that it
had listed the equipment at issue. Thus G.S. 105- 282.1(c) does not apply." This case makes
two issues clear: 1) A late application for exemption can only be approved if filed during the
calendar year in which the taxes are due. 2) Property that is listed by the owner cannot be
exempted for prior years under G.S. 105- 282.1(c).
The case goes further to clearly state: "Moreover, our Supreme Court has held that taxes paid
voluntarily and without objection or compulsion cannot be recovered, even though the tax be
levied unlawfully ". As stated earlier in this memorandum, SEI indeed paid its taxes voluntarily
and without objection or compulsion. As such, the taxes cannot be recovered.
C!
Redevelopment Commission of High Point y Guilford County and City of High Point
While the end ruling of this case provides little to no relevance to the refund request from SEI,
the case does provide significant insight as to the responsibility of a taxpayer in seeking an
entitled exemption or exclusion. The Redevelopment Commission of High Point (hereinafter
"Commission ") believed its property was exempt under Article V, Section 5 of the North
Carolina Constitution, which in pertinent part provides: "Property belonging to the State or to
municipal corporations, shall be exempt from taxation." The property was taxed due to its use as
a private business enterprise even though its ownership may have qualified as an entitled
exemption from taxation.
The details of this case provide that even a governmental entity must properly identify and seek
clarity that any property subject to possible exemption is classified as such within the tax
records. Moreover, it illuminates the difference between an exemption or exclusion that requires
no application versus an automatic exemption. Many classifications of property require no
application for exemption, but that should not be taken as being automatically exempt from
taxation. North Carolina taxpayers have a duty to disclose and properly identify any and all
property that could be subject to exemption, regardless of an application requirement.
North Carolina General Statute (NCGS) 105 -282.1 & Wesleyan Case
This statute states that every owner of property claiming exemption or exclusion from property
taxes has the burden of establishing that the property is entitled to the exemption. Granted,
NCGS 105 -282.1 (1)a states that no application is required for the subject equipment to be
entitled to its exemption. The Wesleyan Case provides direction to counties that, while NCGS
105- 282.1(1) requires no application for property to be entitled to the exemption, it does not
apply to a taxpayer's timely listed property. SEI timely listed its property, allegedly taxable and
non - taxable property together under one heading. Therefore, the entitlement is surrendered.
Moreover, the Wesleyan Case provides additional applicable information. Within the opinion,
the following is stated:
"Taxpayer here listed its property during the 1982 listing period, ~vhich end on March 2,
1982. The property was therefore included in the tax base relied upon by the Tax
Supervisor when he submitted projected revenues to the County Manager prior to 30
April as required by G. S. 159 -10. The Board of County Commissioners was required to
adopt a budget ordinance making appropriations and levying taxes upon this tax base not
later than 1 July. G.S. 159- 13(a). By the time the Taxpayer applied for exempt status on
30 June, the County's budget ordinance was established. Alloyving removal of a
taxpayer's listed property from the tax base after the listing period has closed and the
county has relied upon this tax base in projecting revenues and property a budget would
clearly jeopardize the county's budget. "
5
The direction provided in the Wesleyan case is applicable to this case in that SEI listed allegedly
non - taxable property on its annual listing form since 2013, against the instructions provided by
Orange County. No appeal was filed. SEI did not identify any non - taxable property on its
listing form within the listing period. Orange County relied on the tax base as submitted by SEI
for projected revenues in each affected year. The Board of County Commissioners adopted a
budget ordinance making appropriations and levying taxes upon this tax base before July 1 of
each affected year.
North Carolina General Statute 105- 275(40)b.
SEI submits this statute, amended for the 2014 tax year, in support of its request for refund. The
statute allows for an exclusion for computer software and documentation, but negates the
exclusion where the taxpayer purchases or licenses the software from a person or entity unrelated
to the taxpayer. SEI has submitted no evidence it is related to the seller of the software.
SEI notes correctly that the relationship provision does not apply to "development of software or
any modifications to software, whether done internally by the taxpayer or externally by a third
party, to meet the customer's specified needs." However, SEI has submitted no evidence the
referenced software was developed specifically for SEI use or is generic software that was
modified in a manner specifically for SEI use, only that SET purchased a generic software and
procured training for that software.
Recommendation
As a summary of the issues involved:
• SEI claims to have listed taxable and non- taxable business personal property for tax years
2013 -2017 and has requested a refund of $1,200,000 for tax overpayment.
• Orange County proactively modified its annual listing form instructions beginning with
tax year 2014 to try and preempt taxpayers from listing such property and losing the
entitlement to its exemption. In addition, the modified language in the listing form
instructions, which was promulgated by the North Carolina Department of Revenue
Property Tax Division, even imply that the listing such equipment would result in a loss
of exclusion.
• Through its long- standing contractual auditing firm, a random audit was performed on
SEI in 2014, which included its 2014 listing. The professional auditor recognized no
non- taxable equipment listed, and SEI agreed completely to the findings of the audit
including prior and current year (2014 at that time) listings.
• SEI paid taxes due voluntarily and without objection or compulsion. It was not paid
under protest as cited in Redevelopment Commission v Guilford County and City of
High Point case. Therefore, the Supreme Court has ruled that such taxes "cannot be
recovered, even though the tax be levied unlawfully."
L
• SEI has submitted no evidence these taxes were levied either unlawfully, through clerical
error, or for an illegal purpose.
• SEI has submitted no evidence that granting its request is mandated. In fact, legal
precedent appears to prohibit a refund in this case.
• It appears to be the taxpayer's claim that this property should have been automatically
exempt from taxation. The Redevelopment Commission v Guilford County and City of
High Point case illustrates that a fundamental difference exists between an exemption that
requires no application versus being automatically exempt from taxation.
• The Wesleyan Case provides that, while no application is required for the subject's
classification of property, NCGS 105- 282.1(1) does not apply when a taxpayer timely
lists property for taxation.
For these reasons, it is recommended that the Orange County Board of Commissioners deny this
refund request.
N
NO. COA95 --1168
NORTH CAROLINA COURT OF APPEALS
Filed: 20 August 1996 = ,
In the matter of:
The appeal of Weyerhaeuser Company
from the decision of the Craven County
Board of Commissioners dated
8 February 1994 concerning the listing,
appraisal, and assessment of certain
property for the years 1987 through
1992.
From the North Carolina
Property Tax Commission
No. 94 PTC 59
Appeal by taxpayer from order entered 2 June 1995 by the
North Carolina Property Tax Commission. Heard in the Court of
Appeals 24 May 1996.
C.B. McLean, Jr., for taxpayer - appellant.
sumrell, Bugg, Carmichael & Ashton, P.A., by James R. sugg and
Jimmie B. Hicks, Jr., for County - Appellee.
MARTIN, John C., Judge.
In July 1992, Craven County ( "County ") initiated an audit of
Weyerhaeuser Company's ( "Weyerhaeuser ") personal property tax
listings in the county for the tax years 1987 through 1992. On 29
December 1992, the County's Tax Administrator, pursuant to G.S. §
105- 312(d), sent a notice of discovery to Weyerhaeuser proposing
taxes and penalties against the company for unlisted personal
property. The audit also revealed that Weyerhaeuser had not listed
certain pollution control equipment for the tax years 1991 and
1992.
On 10 December 1992, Weyerhaeuser filed an application with
the North Carolina Department of Environmental, Health and Natural
-2-
Resources ( "DEHNR ")for exemption for "pollution abatement equipment
which was installed .[in its3 New Bern pulp facility," and was
granted the exemption by DEHNR on 21 December 1992. On 16 December
1993, the County issued its final notice and worksheets to
Weyerhaeuser finding that there had been a substantial underlisting
of personal property and a failure to list certain pollution
abatement equipment for tax years 1991 and 1992, and giving notice
of taxes and penalties owed by reason thereof. Weyerhaeuser
subsequently made a timely request for review of the decision to
the Craven County Board of Commissioners, the Craven County Board
of Equalization and Review not being in session.
The County Board of Commissioners granted Weyerhaeuser's
request for exemption of the pollution abatement equipment
"discovered" by the County for tax years 1991 and 1992, but
affirmed the taxes due on other "discovered" taxable property. In
addition, the Commissioners denied what they termed a "request for
refund" by Weyerhaeuser for taxes assessed and paid on pollution
abatement equipment which had been listed by the company for tax
year 1991, but for which no application for exemption was received
in that year. Weyerhaeuser subsequently made a timely appeal to
the North Carolina Property Tax Commission ( "Commission ").
On 20 April 1995, the Commission heard arguments of counsel
and considered documents filed in the matter, including a motion by
the County to dismiss Weyerhaeuser's appeal. By order entered 2
June 1995, the Commission dismissed the appeal. Weyerhaeuser
appeals.
' 9
-3-
The dispositive issue in this appeal is whether the pollution
abatement equipment listed by appellant in 1991, and for which no
exemption was applied for in that year, should now be treated as
"discovered property" entitling appellant to an exemption for taxes
already paid on the equipment. We hold that it should not be so
treated.
"Discovered property" is defined by G.S. § 105- 273(6a) as:
a. Property that was not listed during a
listing period.
b. Property that was listed but the listing
included a substantial understatement.
C. Property that has been granted an
exemption or exclusion and does not qualify
for the exemption or exclusion.
The parties' stipulations in this case make clear that appellant
listed the contested pollution abatement equipment in tax year
1991, that the equipment was correctly valued, and that appellant
was assessed and paid taxes on the equipment in tax year 1991.
Thus, the contested equipment does not meet the statutory
definition of "discovered property."
Nevertheless, the crux of appellant's claim is that, because
the County's "discovery" audit revealed in 1992 that appellant
listed and paid taxes in 1991 on the now contested pollution
abatement equipment without seeking exclusion or exemption in that
year, it was entitled to seek exclusion in 1992 and have the listed
property treated as "discovered." Consequently, appellant claims
the Commission erred in dismissing its appeal because it had
i[t;
-4-
subject matter jurisdiction to address issues of exemption or
exclusion under G.S. S 105- 282.1(a)(5) or (c), or under S 105 -312,
and that the Commission erred in failing to exclude the listed
pollution abatement equipment. We disagree.
Section 105- 282.1(c) provides in pertinent part:
When an owner of property that may be eligible
for exemption or exclusion neither .lists the
property nor files an application for
exemption or exclusion, the assessor or the
Department of Revenue, as appropriate, shall
proceed to discover the property. if, upon
appeal, the owner demonstrates that the
property meets the conditions for exemption or
exclusion, the body hearing the appeal may
approve the'exemption or exclusion. . . .
(emphasis added) . In this case, however, appellant stipulated that
it had listed the equipment at issue. Thus, S 105- 282.1(c) does
not apply. Similarly,, G. S. S 105- 312(d) is not applicable because
it also deals with "discovered" rather than listed property.
Appellant argues, however, that its listing of the equipment
and failure to apply for exclusion under G.S. S 105- 275(8) in tax
year 1991 constituted a "clerical error" which it was entitled to
have corrected by the County Board of Commissioners pursuant to
G.S. S 105- 325(a)(4) so as to treat the property as "discovered."
Our research has revealed no definition of "clerical error" as
applied to G.S. S 105- 325(a)(4). However, this Court has
previously held that ."clerical errors" concern matters such as
transcription errors which are not material in nature. See In re
Nuzumr-Cross Chevrolet, 59 N.C. App. 332, 296 S.E.2d 29.9 (1982),
disc. rev. denied, 307 N.C. 576, 299 S.E.2d 645 (1983). See also
84 C.J.S. Taxation S 507 (noting that errors which affect the
-5-
substance of an assessment are not clerical). We hold as a matter
of law that appellant's listing of the pollution abatement
equipment and failure to apply for exemption for the equipment are
not clerical errors subject to correction under G.S. § 1o5-
325(a)(4) because they are material in nature.
Moreover, we are not persuaded by appellant's argument that
because the County's "discovery" audit was for years 1987- 1992.,
that the entire proceeding amounts to a tax levied in 1992 such
that G.S. S 105- 282.1(a)(5) applies. Section 105- 282.1(a) (5)
provides:
Upon a showing of good cause by the applicant
for failure to make a timely application, an
application for exemption or exclusion filed
after the close of the listing period may be
approved by the Department of Revenue, the
board of equalization and review, the board of
county commissioners, or the governing body of
a municipality, as appropriate. An untimely
application for exemption or exclusion
approved under this subdivision applies only
to property taxes levied by the county or
municipality in the calendar year in which the
untimely application is filed.
(emphasis added) . The statute is inapplicable to the present case.
The parties stipulated that the tax on the contested equipment was
assessed and paid in 1991; appellant's application for exemption
was not filed until 1992. Appellant seeks to have exempted from
taxation property for which an untimely application for exemption
was filed in a different calendar year, which is' not authorized by
the statute. In addition, our review of the record in this case
has revealed no "showing of good cause by the applicant for failure
to make a timely application." Accordingly, this argument of
12
appellant is overruled.
We also reject appellant's contention that its 1992
certificate from DEHNR excluding pollution abatement equipment from
taxation applies retroactively to the contested equipment. Section
105- 275(8) provides that pollution abatement equipment shall be
exempted or excluded from taxation if it is properly certified by
the DEHNR, or other appropriate body, and if the certificate is
furnished to the tax supervisor of the county in which the property
is situated. G.S. S 105 -286 makes clear that, unless otherwise
provided, the value of tangible personal property is to be
determined annually as of 1 January. it is undisputed that
neither of the requirements of G.S. S 105 - 275(8) was met with
respect to the equipment at issue in tax year 1991. Moreover,
appellant's primary argument for its contention rests largely on a
claim of "tardiness" by DEHNR, even though the record shows that
DEHNR issued an exemption certificate eleven days after appellant's
application in December 1992.
For the foregoing reasons, the contested pollution abatement
equipment cannot be treated as "discovered" property entitling
appellant to an exemption for taxes already paid. To the contrary,
we agree with the County that appellant is, in actuality, seeking
a refund for taxes paid on the equipment.
Section 105 -380 of the General Statutes prohibits the
governing body of a taxing unit "from releasing, refunding, or
compromising all or any portion of the taxes levied against any
property within its jurisdiction except as expressly provided in
-7--
[G.S. $ 105 - 381]." Moreover, our Supreme Court has held that
"[t]axes paid voluntarily and without objection or compulsion
cannot be recovered, even though the tax be levied unlawfully."
Middleton v. R.R., 224 N.C. 309, 310, 30 S.E.2d 42, 43 (1944). The
evidence in this case tends to show that appellant paid the taxes
at issue voluntarily and without objection or compulsion.
In addition, as appellant's brief admits, "the Commission
clearly does not have jurisdiction over a question of refund or
release arising under N.C. Gen. Stat. § 105 - 381." Thus, we find
the Commission was not required to make findings of fact in its
order dismissing Weyerhaeuser's appeal. The Commission's order is
affirmed.
AFFIRMED.
Judges GREENE and WALKER concur.
Report per Rule 30(e).
A TRUE COPY
CLERK OF THE COURT OF APPEALS
OF NORTH CAROLINA
BY QVT::�� (:?' (X)�<.. --
GEPUTY CLERK
13
REDEVELOPMENT COM'N OF HIGH POINT v. Guilford County, 164 S.E.2d 476, 274... Page 1 of 6
14
Cited By (7)1(/ feed /search / ?type =o &q= cites %3A(1246924))
This case has been cited by these opinions:
• Stanley v. Department of Conservation & Develop. (1973) (/ opinion/ 1419621 /stanley -v- department -of-
conservation- develop / ?)
• Maready v. City of Winston -Salem (1996) (/ opinion /1204633 /maready -v- city -of- winston- salern / ?)
• Bailey v. State (1991) (/ opinion /1410313 /bailey -v- state / ?)
• Appeal of North Carolina Forestry Foundation (1979) (/ opinion /1391915/ appeal -of- north - carolina - forestry-
foundation/?)
• Appeal of Forsyth Cty. Tax, Etc. (1981) (/ opinion/ 1309979 /appeal -of- Forsyth -cty- tax - etc / ?)
View All Citing Opinions (/ ?q= cites %3A(1246924))
Authorities (17)
This opinion cites:
• Wells v.. Housing Authority, 197 S.E. 693 (N.C. 1938) (/ opinion/ 3930106 /wells -v- housing- authority / ?)
• Mallard v.. Housing Authority, 20 S.E.2d 281 (N.C. 1942) (/opinion/ 3923307 /mallard -v- housing- authority / ?)
• Redevelopment Com'n v. Security National Bank, 114 S.E.2d 688 (N.C. 1960) ( /opinion /1371458 /redevelopment-
comn-v- security - national - bank / ?)
• Benson v.. Johnston County, 185 S.E. 6 (N.C. 1936) (/ opinion/ 3921855 /benson -v- johnston- county / ?)
• Southern Assembly v.. Palmer, 82 S.E. 18 (N.C. 1914) (/ opinion/ 3918458 /southern - assembly- v- palmer / ?)
View All Authorities (/ opinion/ 1246924 /redevelopment - comn -of- high - point -v- guilford- county /authorities / ?)
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REDEVELOPMENT COM'N OF HIGH POINT v. Guilford
County, 164 S.E.2d 476 (N.C. 1968)
Supreme Court of North Carolina
Filed: December 11th, 1968
Precedential Status: Precedential
Citations: 164 S.E.2d 476, 274 N.C. 585
Docket Number: 687
https: / /www.courtlistener. com / opinion /1246924 /redevelopment - comn -of -high- point- v- guil... 5/18/2018
REDEVELOPMENT COM'N OF HIGH POINT v. Guilford County, 164 S.E.2d 476, 274... Page 2 of 6
15
Author: Joseph Branch ( /person /5273 /joseph- branch /)
164 S.E.2d 476 (1968)
274 N.C. 585
REDEVELOPMENT COMMISSION OF HIGH
POINT
V.
GUILFORD COUNTY and City of High Point.
No. 687.
Supreme Court of North Carolina.
December 11, 1968.
*478 Haworth, Riggs, Kuhn & Haworth, High Point, for plaintiff.
David I. Smith, Greensboro, for defendant Guilford County.
BRANCH, Justice.
The question presented to this Court for decision is: Did the Court of Appeals err in holding as a matter of law that real
property acquired and held for redevelopment pursuant to the North Carolina Urban Redevelopment law is not exempt
from taxation if it produces income?
Appellant claims this exemption from taxation under provisions of Article V, Section 5 of the North Carolina Constitution,
which in pertinent part provides: "Property belonging to the State or to municipal corporations, shall be exempt from
taxation." This provisions of the Constitution is self- executing. Piedmont Memorial Hospital v. Guilford County, 218 N.C.
673 (/ opinion/ 3928421 /hospital -v- guilford- countyn, 12 S.E.2d 265 (/ opinion /3928421 /hospital -v- guilford- countyo.
The Court of Appeals correctly held that appellant is a municipal corporation for the purpose of tax exemption.
Redevelopment Commission v. Security Nat. Bank, 252 N.C. 595 (/ opinion/ 1371458 /redevelopment - comn -v- security-
national- banks, 114 S.E.2d 688 (/ opinion/ 1371458 /redevelopment - comn -v- security - national - banks; Mallard v. Eastern
Carolina Regional Housing Authority, 221 N.C. 334 (/ opinion/ 3923307 /mallard -v- housing- authorityo, 20 S.E.2d 281
(/ opinion/ 3923307 /mallard -v- housing- authorityo; Wells v. Housing Authority, 213 N.C. 744 ( /opinion /3930106 /wells -v-
housing- authorityo, 197 S.E. 693 (/ opinion/ 3930106 /wells -v- housing- authorityo. We note in this connection that appellee
concedes, and properly so, that appellant was created and exists for a public purpose.
Appellee maintains that in this case injunction is an improper procedure for determining whether plaintiff is exempt from
the tax.
G.S. § 105 -281 provides: "All property, real and personal, within the jurisdiction of the State, not especially exempted,
shall be subject to taxation."
Ordinarily, the rule that the sovereign may not be denied or delayed in the enforcement of its right to collect revenues
applies to municipalities and every subdivision of state government, and when a tax is levied against a taxpayer he must
pay same under protest and sue for recovery after he has exhausted all existing administrative remedies. Bragg
Development *479 Co. v. Braxton, 239 N.C. 427 (/ opinion/ 1283847 /bragg- development- co- v- braxtonn, 79 S.E.2d 918
(/ opinion /1283847/bragg- d eve lopment- co- v- braxtono.
G.S. § 105 -406 reads as follows:
https: / /www.coul tlistener.com/ opinion /1246924 /redevelopment- comn -of -high- point -v- guil... 5/18/2018
REDEVELOPMENT COM'N OF HIGH POINT v. Guilford County, 164 S.E.2d 476, 274... Page 3 of 6
16
"Unless a tax or assessment, or some part thereof, be illegal or invalid, or be levied or
assessed for an illegal or unauthorized purpose, no injunction shall be granted by any
court or judge to restrain the collection thereof in whole or in part, nor to restrain the sale
of any property for the nonpayment thereof; * * *" (Emphasis ours)
This statute and our case law recognize a distinction between an erroneous tax and an illegal or invalid tax. An illegal or
invalid tax results when the taxing body seeks to impose a tax without authority, as in cases where it is asserted that the
rate is unconstitutional, Perry v. Commissioners of Franklin County, 148 N.C. 521 ( /opinion /3927078/perry-v-
commissioners/), 62 S.E. 608, or that the subject is exempt from taxation, Southern Assembly v. Palmer, 166 N.C. 75
(/ opinion /3918458 /southern - assembly- v- palmern, 82 S.E. 18 (/ opinion /3918458 /southern - assembly- v- palmern. Injunction
will lie when the tax or assessment is itself invalid or illegal. Purnell v. Page, 133 N.C. 125 ( /opinion /3903502 /purnell -v-
pagen, 45 S.E. 534 (/ o pin ion /3903502 / purnell-v- pager; Sherrod v. Dawson, 154 N.C. 525 ( /opinion /3925446 /sherrod -v-
dawsonn, 70 S.E. 739 (/ opinion /3925446 /sherrod- v- dawsonn; Wynn v. Trustees of Charlotte Community College
System, 255 N.C. 594 (/ opinion/ 1336914 /wynn -v- trustees -of- charlotte- community - college -sysn, 122 S.E.2d 404
(/ opinion /1336914/wynn -v- trustees -of- charlotte- community - college -sysn. Here, the equitable remedy of injunction is
proper since appellant contends that the taxing body is without authority to impose the tax because of the constitutional
exemption.
In applying this constitutional exemption this Court for a period of years developed two divergent viewpoints: (1) that
property held by the State or a municipality is exempt without regard to the purpose for which it was acquired and held.
Town of Weaverville v. Hobbs, 212 N.C. 684, 194 S.E. 860; Town of Andrews v. Clay County, 200 N.C. 280, 156 S.E.
855. (2) In order for the exemption to apply to property acquired and held by the State or a municipality, the property
must be held for public or governmental purposes. City of Winston -Salem v. Forsyth County, 217 N.C. 704
(/ opinion/ 3912618 / winston- salem -v- Forsyth - countyn, 9 S.E.2d 381 (/ opinion/ 3912618 / winston-s6lem-v- forsyth - countyn;
Town of Warrenton v. Warren County, 215 N.C. 342 (/ opinion/ 3908493 /warrenton -v- warren - countyn, 2 S.E.2d 463
(/ opinion/ 3908493 /warrenton -v- warren - countyn; Wells v. Housing Authority, supra; Town of Benson v. Johnston County,
209 N.C. 751 (/ opinion/ 3921855 /benson -v- johnston - countyn, 185 S.E. 6 (/ opinion /3921855 /benson -v- johnston- countyn;
Board of Financial Control v. Henderson County, 208 N.C. 569 (/ opinion/ 3903061 /board -of- financial - control -v-
henderson- countyn, 181 S.E. 636 (/ opinion/ 3903061 / board -of- financial - control- v- h end erson- countyn, 101 A.L.R. 783;
Atlantic & N. C. R. R. Co. v. Board of Commissioners, 75 N.C. 474 (/ opinion /3924240 /r- r- v- commissionersn.
The decided current of authority follows, and we think correctly so, the view of the latter line of cases. We deem it
necessary to briefly review these controlling decisions.
In Atlantic & N. C. R. R. Co. v. Board of Commissioners, supra, the Court, in holding that the provisions of the North
Carolina Constitution which provided that "property belonging to the State * * * shall be exempt from taxation" did not
embrace the interest of the State in such enterprises as the operation of railroads, said:
"The Capitol is not taxed because the State would be paying out money just to receive it
back again, less the expenses of handling it. And if taxed for local purposes it would to that
extent embarrass the State government.
* * * * **
I
"But where the State steps down from her sovereignty and embarks with individuals in
business enterprises, the same considerations do not prevail.
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"(W)e do not think the exemption in the Constitution embraces the interest of the State in
business enterprises, but applies to the property of the State held for State purposes."
In the case of Town of Benson v. Johnston County, supra, the plaintiff, a municipality, acquired certain property within its
corporate limits by tax foreclosure. After acquisition of the property, the municipality rented the property and received
rents therefrom. The county levied an ad valorem tax against the property, and the municipality contended that the
property was exempt from taxation from the date the municipality acquired the title, relying *480 on Article V, Section 5 of
the North Carolina Constitution, and N.C.Code §§ 7880 (2), (177) (Michie 1935). The Court held that the property was
liable for county taxes, since it was not used by the city for governmental purposes, and stated:
"We think that the question involved in this controversy was settled in Board of Financial
Control v. Henderson County, 208 N.C. 569 (/ opinion/ 3903061 /boa rd -of- financial- control-
v-henderson- county /), 571 -572, 181 S.E. 636 (/ opinion/ 3903061 /board -of- financial- control-
v- henderson- county /), where it is said: 'So the question in this controversy narrows itself
down: Can the City of Asheville a municipal corporation, acquire business property in
another county, hold and rent it without the payment of taxes in that county? We think not.
The property is not held or used for any governmental or necessary public purpose, but for
purely business purposes. "'
Quoting with approval from the case of Village of Watkins Glen v. Hager, 140 Misc. 816,
252 N.Y.S. 146, the Court stated: "'It is manifest there are two classes of property of
municipal corporation exempt from taxation. * * * First is that class of property held for a
public use, in that it is used in connection with the operation of the functions of
government, such as municipal buildings; second, that class of property held for a public
use, in that it is for the benefit of the people for their free use and enjoyment, such as
parks, playgrounds, athletic fields, art museums, and public uses of a similar nature.
"'When the municipal corporation, however, acquires and holds property without devoting
the same to either class of purpose, it is simply held without use. The fact that it is to a
certain extent used for the purpose of producing income, when there is no definite plan
evolved for its use by or for the public, cannot reasonably be said to constitute holding for
a public use. * * *' (Emphasis ours)
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"There is no evidence in the record of this case indicating that the Town of Benson ever
had any intention of devoting the lands purchased under tax foreclosure proceedings for a
public purpose. The lands were rented, and the town received the rental income. They
were held for sale, and the present action was brought because of bidders for the
property. The only suggestion of a public purpose or public use is that the purchase of the
tracts was necessary to protect the town's tax liens. Having done that, the town held the
lands as would any other purchaser, renting the property as a private individual would
have done, and now it proposes to sell the lands, as any private individual purchaser might
have done."
In the case of Town of Warrenton v. Warren County, supra, the facts show that the defendant municipality acquired a
hotel within its corporate Limits by purchase under a foreclosure sale, in order to protect an investment which had been
made in the hotel corporation by the Town of Warrenton. In holding that the provisions of Article V, Section 5 of the State
Constitution applied to State or municipal property which is used for a governmental or public purpose, and that the
property of the defendant municipality used for business purposes was not exempt from taxation by the county, the Court
stated:
"The property is neither held for nor used for governmental or necessary public purposes,
but purely for business purposes, and in competition with any other hotel that may be
established in the town of Warrenton or vicinity. 'If a municipal corporation can go into a
rental business and escape taxation, it would have a special privilege not accorded to
others who are in a like business.' Board of Financial Control v. Henderson County,
supra."
Wells v. Housing Authority, supra, involves a "municipal corporation" so nearly akin to appellant in purpose and structure
that we consider its holding very persuasive. In that case defendant Housing Authority *481 was created pursuant to
Chapter 456 of the Public Laws of 1935 for the purpose of protecting low- income citizens from unsafe or unsanitary
conditions by providing for them low cost rental dwellings and apartments. The Court held defendant Housing Authority
to be such a "municipal corporation" as is exempt from state, county and municipal taxation by virtue of Article V, Section
5 of the North Carolina Constitution, and that the property held by it for rental purposes was held for a public purpose. It
is to be noted that even though income was presumably derived from the rental of the property held by defendant
Housing Authority, the property was declared by the Court to be exempt from taxation.
The cases cited as controlling authority reached differing results as to whether the tax exemption applied. However,
differing results do not necessarily do violence to the rule of law when there are factual differences. The cases of Town
of Benson v. Johnston County, supra, and Town of Warrenton v. Warren County, supra, are easily distinguishable. In the
instant case the allegations of the complaint show acquisition of property with intent to use for a public purpose, a
definite plan evolved for its use for the public, and an actual public use of the property. In Town of Benson v. Johnston
County, supra, and Town of Warrenton v. Warren County, supra, neither acquisition with intent to use for public purpose
nor a definitely evolved plan for public use was shown. It was shown that the property was held for strictly business
purposes. The same distinctions apply between this case and the cases of Atlantic & N. C. R. R. Co. v. Board of
Commissioners, supra; Board of Financial Control v. Henderson County, supra, and City of Winston -Salem v. Forsyth
County, supra. Conversely, applying the same principles of law to the factual situation of Wells v. Housing Authority,
supra, and Mallard v. Eastern Carolina Regional Housing Authority, supra, the Court found that the exemption did apply.
A definition of public purpose sufficient to fit all fields of the law and all factual situations is not possible. In Black's Law
Dictionary 1394 (4th Ed. 1957), we find the following:
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"In the law of taxation, eminent domain, etc., this is a term of classification to distinguish
the objects for which, according to settled usage, the government is to provide, from those
which, by the like usage, are left to private interest, inclination, or liberality. * * * The term is
synonymous with governmental purpose. * * * A public purpose or public business has for
its objective the promotion of the public health, safety, morals, general welfare, security,
prosperity, and contentment, of all the inhabitants or residents within a given political
division,
The facts and circumstances of each case determines whether there is such public purpose as to bring the state or
municipal corporation within the claimed exemption. For example, the purposes for which the municipal corporation was
created, whether it has departed from the protected area of immunity, or if the reason for its immunity has ceased to
exist, should be considered.
We observe, parenthetically, that the word "necessary" used by some of the authorities herein cited seems to be without
significance in describing a public purpose in the context of this tax exemption.
In determining whether or not property falls within a tax exemption provision, the primary or dominant use, and not an
incidental or secondary use, will control. Iota Benefit Ass'n v. County of Douglas, 165 Neb. 330, 85 N.W.2d 726, 66
A.L.R. 2d 898; 51 Am.Jur., Taxation § 539 (1944). An exemption of the entire property may be allowed notwithstanding
an intermingled private use, when the latter use is only incidental. 51 Am.Jur., Taxation § 576 (1944).
*482 The general rule is stated at Annot., 3 A.L.R., 1439, 1445 (1919) as follows: "(W)here the primary and principal use
to which property is put is public, the mere fact that an income is incidentally derived from it does not affect its character
as property devoted to public use."
It would seem unreasonable and to the obvious detriment of the taxpayer that property primarily used for a public
purpose and incidentally producing income should be reduced to nonincome - producing property in order to maintain its
tax exempt status while the property is necessarily held by a municipality in order to carry out its public purpose.
In applying the rules herein set forth it must be borne in mind that this case is before us on demurrers and that for the
purpose of testing the sufficiency of the pleading the well- stated allegations of fact and relevant inferences of fact
reasonably deducible therefrom are admitted to be true, and the pleading must be liberally construed so as to give the
pleader the benefit of every reasonable intendment in his favor. Glover v. Brotherhood of Ry. etc., Employees, 250 N.C.
35 (/ opinion/ 1220128 /glover -v- brotherhood -of- railway -s- clerks -etch, 108 S.E.2d 78 ( /opinion /1220128 /glover -v-
brotherhood-of- railway -s- clerks- etc /).
We hold that plaintiff alleged sufficient facts from which it might be reasonably inferred that all of the property held by
appellant was acquired and held primarily for governmental and public purposes according to a definitely evolved plan to
use the property for the public. The collection of rent while the property was being held for a public or governmental
purpose was incidental and secondary to the dominant public use and did not remove it "from the city hall" to "the market
place."
When a plaintiff seeks the equitable relief of injunction, his pleadings should be full in alleging facts necessary to show
the illegality or invalidity of the tax. McDonald v. Teague, 119 N.C. 604 (/ opinion /3915778 /mcdonald- v- teaguen, 26 S.E.
158 (/ opinion /3915778 /mcdonald- v- teaguen. Here, although plaintiffs pleadings meet minimum requirements, it would be
well advised to move to amend its pleadings to the end that it might more fully allege facts as to the acquisition and use
of the property.
The Court of Appeals erred in holding, as a matter of law, that the income - producing property held and acquired for
redevelopment purposes was not exempt from taxation because it produced income. The demurrers should have been
overruled.
Modified and affirmed.
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W,
NO. 831OPTC550
NORTH CAROLINA COURT OF APPEALS
Filed: 5 June 1984
IN THE MATTER OF:
Appeal of Wesleyan Education
Center from denial of exemption Property Tax Comm- 111 -S on for its property for
year 1982 == F
u1 ~�3
- co
Appeal by Taxpayer from the final decision of the :North
N
Carolina property Tax Commission entered 28 February 1983. Heard
in the Court of Appeals 3 April 1984.
On 4 March 1981 Kernersville Wesleyan Academy conveyed
54 acres of land to Wesleyan Education Center (hereinafter
Taxpayer), a non - profit corporation. Since 1974 the property had
been exempted from payment of ad valorem taxes. Taxpayer listed
the property during the listing period for 1982 but did not apply
for tax exempt status until 30 June 1982, approximately four
months after the 1982 listing period had ended and after Taxpayer
had been notified by the Forsyth County Tax Supervisor that the
property was no longer exempt. Also on 30 June 1982 Taxpayer
appeared before the—Forsyth County Board of Equalization and
Review to appeal the Supervisor's denial of tax exempt status for
1982. The Board denied exemption to the property on grounds that
no application was filed by Taxpayer during the 1.982 listing
period.
On appeal to the North Carolina Property Tax
Commission, the Taxpayer and County stipulated to the following
21
-t-
issue: whether a tax supervisor or board of equalization and
review has authority to grant an exemption for property which its
owner had listed during the listing period but failed to file an
application for exemption during this period. After considering
the evidence of the parties and the law governing the taxation of
property set out in the "Machinery Act," G.S. 105 -271 et seq.,
the Commission concluded:
There is no authority, under the Machinery
Act as presently written, for either the tax
supervisor or the board of equalization and
review to grant an exemption for property
which its owner had listed during the listing
period but for which its owner failed to file
an application for exemption during the
listing period.
From this final decision of the Commission, Taxpayer appeals,
Thomas & Coltrane, by Raymond D. Thomas, for appellant
Wesleyan Education Center.
P. Eugene Price, Jr. and Jonathan V. Maxwell, for
appellee Forsyth County.
ARNOLD, Judge.
Taxpayer assigns error to the Commission's decision and
argues that the Machinery Act presently allows either a county
tax supervisor or board of equalization and review to grant an
exemption when the owner has listed his property during the
listing period but does not apply for exempt status until after
this period. We disagree for the reasons given in the
Commission's decision.
Wd
-3-
The Commission based its decision on the express
mandate set out in G.S. 105- 282.1(a):
Every owner of property claiming exemption or
exclusion from property taxes under the
provisions of this Subchapter has the burden
of establishing that the property is entitled
thereto. Except as otherwise provided below,
every owner claiming exemption or exclusion
hereunder shall annually, during the regular
listing period, file an application therefor
with the tax supervisor of the county in
which the property would be subject to taxes
if taxable. (Emphasis added.)
The Commission emphasized that this statutory requirement allows
no flexibility for the filing of an application for exemption
after the listing period. The rationale for this strict
application is "to enable the taxing officials to determine the
reductions in their tax base prior to setting the tax rate."
Taxpayer here listed its property during the 1982
listing period, which ended on 2 March 1982. The property was
therefore included in the tax base relied upon by the Tax
Supervisor when he submitted projected revenues to the County
Manager prior to 30 April as required by G.S. 159 -10. The Board
of County Commissioners was required to adopt a budget ordinance
making appropriations and levying taxes upon this tax base not
later than 1 July. G.S. 159- 13(a). By the time Taxpayer applied
for exempt status on 30 June, the County's budget ordinance was
established. Allowing removal of a taxpayer's listed property
from the tax base after the listing period has closed and the
county has relied upon this tax base in projecting revenues and
proposing a budget would clearly jeopardize the county's budget.
23
-4-
We find no merit to Taxpayer's argument that G.S.
105- -282.1(c) allows either a tax supervisor or board of
equalization and review to consider the merits of a late
application for exemption of listed property. This statute
provides in part:
When an owner of property who is
required to file an application for exemption
or exclusion fails to do so, the tax
supervisor shall proceed to discover the
property as provided in G.S. 105 -312. If
upon appeal to the county board of
equalization and review or board of
commissioners, the owner demonstrates that
the property meets the conditions for
exemption, the exemption may be approved by
the hoard at that time.
Taxpayer argues that the Commission's interpretation of
the foregoing statute as allowing review of the exempt status of
a taxpayer who fails to list his property, but denying a hearing
to a taxpayer who lists his property and does not file an
application for exemption until after the .listing period, is
absurd. This argument can be refuted on two grounds. First, the
Legislature has defined the phrase "to discover property" as "the
determination that property has not been listed during a regular
listing period and to the identification of the omitted item."
G.S. 105- 312(a)(3). This language is clear that property can
only be discovered if it is not listed. G.S. 105- 282.1(c),
therefore, does not apply to Taxpayer's timely listed property.
Second, an owner of discovered property which meets the
conditions for exemption is allowed an exemption after the
Pz!
-5-
listing period, because his unlisted property was never included
in the county's tax base. Granting an exemption to unlisted
property would not jeopardize the budget adopted by the county.
Taxpayer's remaining assignment of error involves the
constitutional validity of the Commission's interpretation of
G.S. 105- 282.1. Since this issue was not raised before the Board
of Equalization and Review and since the one issue before the
Property Tax Commission did not include constitutional questions,
Taxpayer cannot raise the issue on appeal to this Court. See
White v. Pate, 308 N.C. 759, 309 S.E. 2d 199 (1983).
The decision of the North Carolina Property Tax
Commission is
Affirmed.
Judges WELLS and BRASWELL concur.
A TRUE COPY
URT OF APPEALS
CLERK OF TH RTNO CAR IN
OF /
SY. EPUTY GEERK 7
a2 d • j9
G.S. 105 -282.1
Page 1 of 2
25
§ 105 - 282.1. Applications for property tax exemption or exclusion; annual review of property
exempted or excluded from property tax.
(a) Application. - Every owner of property claiming exemption or exclusion from property
taxes under the provisions of this Subchapter has the burden of establishing that the property is
entitled to it. If the property for which the exemption or exclusion is claimed is appraised by the
Department of Revenue, the application shall be filed with the Department. Otherwise, the application
shall be filed with the assessor of the county in which the property is situated. An application must
contain a complete and accurate statement of the facts that entitle the property to the exemption or
exclusion and must indicate the municipality, if any, in which the property is located. Each
application filed with the Department of Revenue or an assessor shall be submitted on a form
approved by the Department. Application forms shall be made available by the assessor and the
Department, as appropriate.
Except as provided below, an owner claiming an exemption or exclusion from property taxes must
file an application for the exemption or exclusion annually during the listing period.
(1) No application required. - Owners of the following exempt or excluded property
do not need to file an application for the exemption or exclusion to be entitled to
receive it:
a. Property exempt from taxation under G.S. 105 -278.1 or G.S. 105- 278.2.
b. Special classes of property excluded from taxation under G.S. 105- 275(15),
(16), (26), (31), (32a), (33), (34), (37), (40), (42), or (44).
C. Property classified for taxation at a reduced valuation under G.S. 105 -277
(g) or G.S. 105- 277.9.
(2) Single application required. - An owner of one or more of the following properties
eligible for a property tax benefit must file an application for the benefit to receive
it. Once the application has been approved, the owner does not need to file an
application in subsequent years unless new or additional property is acquired or
improvements are added or removed, necessitating a change in the valuation of the
property, or there is a change in the use of the property or the qualifications or
eligibility of the taxpayer necessitating a review of the benefit.
a. Property exempted from taxation under G.S. 105 - 278.3, 105- 278.4, 105-
278.5, 105- 278.6, 105- 278.7, or 105 - 278.8.
b. Special classes of property excluded from taxation under G.S. 105- 275(3),
(7), (8), (12), (17), (18), (19), (20), (21), (31e), (35), (36), (38), (39), (41),
or (45) or under G.S. 131A -21.
C. Special classes of property classified for taxation at a reduced valuation
under G.S. 105- 277(h), 105- 277.1, 105- 277.1C, 105- 277.10, 105- 277.13,
105 - 277.14, 105- 277.15, 105- 277.17, or 105 -278.
d. Property owned by a nonprofit homeowners' association but where the
value of the property is included in the appraisals of property owned by
members of the association under G.S. 105- 277.8.
e. Repealed by Session Laws 2008 -35, s. 1.2, effective for taxes imposed for
taxable years beginning on or after July 1, 2008.
(al) Late Application. - Upon a showing of good cause by the applicant for failure to make a
timely application, an application for exemption or exclusion filed after the close of the listing period
may be approved by the Department of Revenue, the board of equalization and review, the board of
county commissioners, or the governing body of a municipality, as appropriate. An untimely
application for exemption or exclusion approved under this subsection applies only to property taxes
levied by the county or municipality in the calendar year in which the untimely application is filed.
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G.S. 105 -282.1
Page 2 of 2
26
(b) Approval and Appeal Process. - The Department of Revenue or the assessor to whom an
application for exemption or exclusion is submitted must review the application and either approve or
deny the application. Approved applications shall be filed and made available to all taxing units in
which the exempted or excluded property is situated. If the Department denies an application for
exemption or exclusion, it shall notify the taxpayer, who may appeal the denial to the Property Tax
Commission.
If an assessor denies an application for exemption or exclusion, the assessor must notify the owner
of the decision and the owner may appeal the decision to the board of equalization and review or the
board of county commissioners, as appropriate, and from the county board to the Property Tax
Commission. If the notice of denial covers property located within a municipality, the assessor shall
send a copy of the notice and a copy of the application to the governing body of the municipality. The
municipal governing body shall then advise the owner whether it will adopt the decision of the county
board or require the gwner to file a separate appeal with the municipal governing body. In the event
the owner is required to appeal to the municipal governing body and that body renders an adverse
decision, the owner may appeal to the Property Tax Commission. Nothing in this subsection shall
prevent the governing body of a municipality from denying an application which has been approved
by the assessor or by the county board provided the owner's rights to notice and hearing are not
abridged. Applications handled separately by a municipality shall be filed in the office of the person
designated by the governing body, or in the absence of such designation, in the office of the chief
fiscal officer of the municipality.
(c) Discovery of Property. - When an owner of property that may be eligible for exemption or
exclusion neither lists the property nor files an application for exemption or exclusion, the assessor or
the Department of Revenue, as appropriate, shall proceed to discover the property. If, upon appeal, the
owner demonstrates that the property meets the conditions for exemption or exclusion, the body
hearing the appeal may approve the exemption or exclusion. Discovery of the property by the
Department or the county shall automatically constitute a discovery by any taxing unit in which the
property has a taxable situs.
(d) Roster of Exempted and Excluded Property. - The assessor shall prepare and maintain a
roster of all property in the county that is granted tax relief through classification or exemption. On or
before November 1 of each year, the assessor must send a report to the Department of Revenue
summarizing the information contained in the roster. The report must be in the format required by the
Department. The assessor must also send the Department a copy of the roster upon the request of the
Department. As to affected real and personal property, the roster shall set forth:
(1) The name of the owner of the property.
(2) A brief description of the property.
(3) A statement of the use to which the property is put.
(4) A statement of the value of the property.
(5) The total value of exempt property in the county and in each municipality therein.
(e) Annual Review of Exempted or Excluded Property. - Pursuant to G.S. 105 - 296(1), the
assessor must annually review at least one- eighth of the parcels in the county exempted or excluded
from taxation to verify that the parcels qualify for the exemption or exclusion. (1973, c. 695, s. 8; c.
1252; 1981, c. 54, ss. 2, 3; c. 86, s. 2; c. 915; 1985 (Reg. Sess., 1986), c. 982, s. 22; 1987, C. 45, s. 1;
c. 295, ss. 5, 6; c. 680, ss. 1 -3; c. 813, s. 13; 1989, c. 674, s. 2; c. 723, s. 2; 1991, c. 34, s. 1; 1991
(Reg. Sess., 1992), c. 975, s. 3; 1993, c. 459, s. 3; 1995, c. 41, s. 7; 1995 (Reg. Sess., 1996), c. 646, s.
16; 1997 -23, s. 4; 2000 -140, s. 72(b); 2001 -139, s. 1; 2007 -484, s. 43.7T(b); 2007 -497, s. 2.4; 2008-
35, s. 1.3; 2008 -107, s. 28.1l(g); 2008 -171, ss. 3, 7(c); 2009 -445, s. 23(a), (c) -(e); 2009 -481, s. 3.)
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§ 105 -275. Property classified and excluded from the tax base. 27
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:
(1)
Repealed by Session Laws 1987, c. 813, s. 5.
(2)
Tangible personal property that has been imported from a foreign country through a North
Carolina seaport terminal and which is stored at such a tenninal while awaiting further
shipment for the first 12 months of such storage. (The purpose of this classification is to
encourage the development of the ports of this State.)
(3)
Real and personal property owned by nonprofit water or nonprofit sewer associations or
corporations.
(4)
Repealed by Session Laws 1987, c. 813, s. 5.
(5)
Vehicles that the United States government gives to veterans on account of disabilities they
suffered in World War 11, the Korean Conflict, or the Vietnam Era so long as they are owned
by:
a. A person to whom a vehicle has been given by the United States government or
b. Another person who is entitled to receive such a gift under Title 38, section 252,
United States Code Annotated,
(5a)
A motor vehicle owned by a disabled veteran that is altered with special equipment to
accommodate a service - connected disability. As used in this section, disabled veteran means a
person as defined in 38 U.S.C. § 101(2) who is entitled to special automotive equipment for a
service - connected disability, as provided in 38 U.S.C. § 3901.
(6)
Special nuclear materials held for or in the process of manufacture, processing, or delivery by
the manufacturer or processor thereof, regardless whether the manufacturer or processor owns
the special nuclear materials. The terns "manufacture" and "processing" do not include the
use of special nuclear materials as fuel. The term "special nuclear materials" includes (i)
uranium 233, uranium enriched in the isotope 233 or in the isotope 235; and (ii) any material
artificially enriched by any of the foregoing, but not including source material. "Source
material" means any material except special nuclear material which contains by weight one
twentieth of one percent (0.05 %) or more of (i) uranium, (ii) thorium, or (iii) any combination
thereof. Provided however, that to qualify for this exemption no such nuclear materials shall
be discharged into any river, creels or stream in North Carolina. The classification and
exclusion provided for herein shall be denied to any manufacturer, fabricator or processor
who permits burial of such material in North Carolina or who permits the discharge of such
nuclear materials into the air or into any river, creek or stream in North Carolina if such
discharge would contravene in any way the applicable health and safety standards established
and enforced by the Department of Environmental Quality or the Nuclear Regulatory
Commission. The most stringent of these standards shall govern.
(7)
Real and personal property that is:
a. Owned either by a nonprofit corporation formed under the provisions of Chapter 55A
of the General Statutes or by a bona fide charitable organization, and either operated
by such owning organization or leased to another such nonprofit corporation or
charitable organization, and
b. Appropriated exclusively for public parks and drives.
(7a)
(Expiring for taxes imposed for taxable years beginning on or after July 1, 2021) Real
and personal property that meets each of the following requirements:
a. It is a contiguous tract of land previously (i) used primarily for commercial or
industrial purposes and (ii) damaged significantly as a result of a fire or explosion.
b. It was donated to a nonprofit corporation formed under the provisions of Chapter 55A
of the General Statutes by an entity other than an affiliate, as defined in G.S. 105-
163.010.
C. No portion is or has been leased or sold by the nonprofit corporation.
(8)
a. Real and personal property that is used or, if under construction, is to be used
exclusively for air cleaning or waste disposal or to abate, reduce, or prevent the
pollution of air or water (including, but not limited to, waste lagoons and facilities
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owned by public or private utilities built and installed primarily for the APose of
providing sewer service to areas that are predominantly residential in character or
areas that lie outside territory already having sewer service), if the Department of
Environmental Quality or a local air pollution control program for air- cleaning devices
located in an area where the Environmental Management Commission has certified a
local air pollution control program pursuant to G.S. 143 - 215.112 furnishes a certificate
to the tax supervisor of the county in which the property is situated or to be situated
stating that the Environmental Management Commission or local air pollution control
program has found that the described property:
1. Has been or will be constructed or installed;
2. Complies with or that plans therefor which have been submitted to the
Environmental Management Commission or local air pollution control
program indicate that it will comply with the requirements of the
Environmental Management Commission or local air pollution control
program;
3. Is being effectively operated or will, when completed, be required to operate in
accordance with the terms and conditions of the permit, certificate of approval,
or other document of approval issued by the Environmental Management
Commission or local air pollution control program; and
4. Has or, when completed, will have as its primary rather than incidental purpose
the reduction of water pollution resulting from the discharge of sewage and
waste or the reduction of air pollution resulting from the emission of air
contaminants.
al. Sub- subdivision a. of this subdivision shall not apply to an animal waste management
system, as defined in G.S. 143 - 215,1013, unless the Environmental Management
Commission determines that the animal waste management system will accomplish all
of the following:
1. Eliminate the discharge of animal waste to surface waters and groundwater
through direct discharge, seepage, or runoff.
2. Substantially eliminate atmospheric emissions of ammonia.
3. Substantially eliminate the emission of odor that is detectable beyond the
boundaries of the parcel or tract of land on which the farm is located.
4. Substantially eliminate the release of disease - transmitting vectors and airborne
pathogens.
5. Substantially eliminate nutrient and heavy metal contamination of soil and
groundwater.
b. Real or personal property that is used or, if under construction, is to be used
exclusively for recycling or resource recovering of or from solid waste, if the
Department of Environmental Quality furnishes a certificate to the tax supervisor of
the county in which the property is situated stating the Department of Environmental
Quality has found that the described property has been or will be constructed or
installed, complies or will comply with the rules of the Department of Environmental
Quality, and has, or will have as its primary purpose recycling or resource recovering
of or from solid waste.
C. Tangible personal property that is used exclusively, or if being installed, is to be used
exclusively, for the prevention or reduction of cotton dust inside a textile plant for the
protection of the health of the employees of the plant, in accordance with occupational
safety and health standards adopted by the State of North Carolina pursuant to Article
16 of G.S. Chapter 95. Notwithstanding the exclusive use requirement of this sub -
subdivision, all parts of a ventilation or air conditioning system that are integrated into
a system used for the prevention or reduction of cotton dust, except for chillers and
cooling towers, are excluded from taxation under this sub- subdivision. The
Department of Revenue shall adopt guidelines to assist the tax supervisors in
administering this exclusion.
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d. Real or personal property that is used or, if under construction, is to be2tged by a
major recycling facility as defined in G.S, 105- 129.25 predominantly for recycling or
resource recovering of or from solid waste, if the Department of Environmental
Quality ftimishes a certificate to the tax supervisor of the county in which the property
is situated stating the Department of Environmental Quality has found that the
described property has been or will be constructed or installed for use by a major
recycling facility, complies or will comply with the rules of the Department of
Environmental Quality, and has, or will have as a purpose recycling or resource
recovering of or from solid waste.
(9) through (11) Repealed by Session Laws 1987, c. 813, s. 5.
(12) Real property that (i) is owned by a nonprofit corporation or association organized to receive
and administer lands for conservation purposes, (ii) is exclusively held and used for one or
more of the purposes listed in this subdivision, and (iii) produces no income or produces
income that is incidental to and not inconsistent with the purpose or purposes for which the
land is held and used. The taxes that would otherwise be due on land classified under this
subdivision shall be a lien on the real property of the taxpayer as provided in G.S. 105- 355(a).
The taxes shall be carried forward in the records of the taxing unit or units as deferred taxes.
The deferred taxes for the preceding five 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. A disqualifying event occurs when the property (i) is no longer
exclusively held and used for one or more of the purposes listed in this subdivision, (ii)
produces income that is not incidental to and consistent with the purpose or purposes for
which the land is held and used, or (iii) is sold or transferred without an easement recorded at
the time of sale that requires perpetual use of the land for one or more of the purposes listed in
this subdivision and that prohibits any use of the land that would generate income that is not
incidental to and consistent with the purpose or purposes for which the land is held and used.
In addition to the provisions in G.S. 105 - 277.117, all liens arising under this subdivision are
extinguished upon the real property being sold or transferred to a local, state, or federal
government unit for conservation purposes or subject to an easement recorded at the time of
sale that requires perpetual use of the land for one or more of the purposes listed in this
subdivision. The purposes allowed under this subdivision are any of the following:
a. Used for an educational or scientific purpose as a nature reserve or park in which wild
nature, flora and fauna, and biotic communities are preserved for observation and
study. For purposes of this sub - subdivision, the terms "educational purpose" and
"scientific purpose" are defined in G.S. 105- 278.7(f).
b. Managed under a written wildlife habitat conservation agreement with the North
Carolina Wildlife Resources Commission.
C. Managed under a forest stewardship plan developed by the Forest Stewardship
Program.
d. Used for public access to public waters or trails.
e. Used for protection of water quality and subject to a conservation agreement under the
provision of the Conservation and Historic Preservation Agreements Act, Article 4,
Chapter 121 of the General Statutes.
f. Held by a nonprofit land conservation organization for sale or transfer to a local, state,
or federal government unit for conservation purposes.
(13) Repealed by Session Laws 1973, c. 904.
(14) Motor vehicles chassis belonging to nonresidents, which chassis temporarily enters the State
for the purpose of having a body mounted thereon.
(15) Upon the date on which each county's next general reappraisal of real property under the
provisions of G.S. 105- 286(a) becomes effective, standing timber, pulpwood, seedlings,
saplings, and other forest growth, (The purpose of this classification is to encourage proper
forest management practices and to develop and maintain the forest resources of the State.)
(16) Non - business Property. - As used in this subdivision, the term "non- business property" means
personal property that is used by the owner of the property for a purpose other than the
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production of income and is not used in connection with a business. The ten- Ancludes
household furnishings, clothing, pets, lawn tools, and lawn equipment. The term does not
include motor vehicles, mobile homes, aircraft, watercraft, or engines for watercraft.
(17) Real and personal property belonging to the American Legion, Veterans of Foreign Wars,
Disabled American Veterans, or to any similar veterans organizations chartered by the
Congress of the United States or organized and operated on a statewide or nationwide basis,
and any post or local organization thereof, when used exclusively for meeting or lodge
purposes by said organization, together with such additional adjacent real property as may be
necessary for the convenient and normal use of the buildings thereon. Notwithstanding the
exclusive -use requirement hereinabove established, if a part of a property that otherwise
meets this subdivision's requirements is used for a purpose that would require that it not be
listed, appraised, assessed or taxed if the entire property were so used, that part, according to
its value, shall not be listed, appraised, assessed or taxed. The fact that a building or facility is
incidentally available to and patronized by the general public, so far as there is no material
amount of business or patronage with the general public, shall not defeat the classification
granted by this section.
(18) Real and personal property belonging to the Grand Lodge of Ancient, Free and Accepted
Masons of North Carolina, the Prince Hall Masonic Grand Lodge of North Carolina, their
subordinate lodges and appendant bodies including the Ancient and Arabic Order Nobles of
the Mystic Shrine, and the Ancient Egyptian Order Nobles of the Mystic Shrine, when used
exclusively for meeting or lodge purposes by said organization, together with such additional
adjacent real property as may be necessary for the convenient normal use of the buildings
thereon. Notwithstanding the exclusive -use requirement hereinabove established, if a part of a
property that otherwise meets this subdivision's requirements is used for a purpose that would
require that it not be listed, appraised, assessed or taxed if the entire property were so used,
that part, according to its value, shall not be listed, appraised, assessed or taxed. The fact that
a building or facility is incidentally available to and patronized by the general public, so far as
there is no material amount of business or patronage with the general public, shall not defeat
the classification granted by this section.
(19) Real and personal property belonging to the Loyal Order of Moose, the Benevolent and
Protective Order of Elks, the Knights of Pythias, the Odd Fellows, the Woodmen of the
World, and similar fraternal or civic orders and organizations operated for nonprofit
benevolent, patriotic, historical, charitable, or civic purposes, when used exclusively for
meeting or lodge purposes by the organization, together with as much additional adjacent real
property as may be necessary for the convenient normal use of the buildings. Notwithstanding
the exclusive -use requirement of this subdivision, if a part of a property that otherwise meets
this subdivision's requirements is used for a purpose that would require that it not be listed,
appraised, assessed, or taxed if the entire property were so used, that part, according to its
value, shall not be listed, appraised, assessed, or taxed. The fact that a building or facility is
incidentally available to and patronized by the general public, so far as there is no material
amount of business or patronage with the general public, shall not defeat the classification
granted by this section. Nothing in this subdivision shall be construed so as to include social
fraternities, sororities, and similar college, university, or high school organizations in the
classification for exclusion from ad valorem taxes.
(19a) Iniprovements to real property that are (i) owned by social fraternities, sororities, and similar
college, university, or high school organizations and (ii) located on land owned by or
allocated to The University of North Carolina or one if its constituent institutions.
(20) Real and personal property belonging to Goodwill Industries and other charitable
organizations organized for the training and rehabilitation of disabled persons when used
exclusively for training and rehabilitation, including commercial activities directly related to
such training and rehabilitation.
(21) Repealed by Session Laws 2008 -107, s. 28.11(a), effective for taxes imposed for taxable
years beginning on or after July 1, 2009.
(22) Repealed by Session Laws 1987, c. 813, s. 5.
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(23)
Tangible personal property imported from outside the United States and held in- Woreign
Trade Zone for the purpose of sale, manufacture, processing, assembly, grading, cleaning,
mixing or display and tangible personal property produced in the United States and held in a
Foreign Trade Zone for exportation, either in its original form or as altered by any of the
above processes.
(24)
Cargo containers and container chassis used for the transportation of cargo by vessels in
ocean commerce.
The term "container" applies to those nondisposable receptacles of a permanent character
and strong enough for repeated use and specially designed to facilitate the carriage of goods,
by one or more modes of transport, one of which shall be by ocean vessels, without
intermediate reloadings and fitted with devices permitting its ready handling particularly in
the transfer from one transport mode to another.
(24a)
Aircraft that is owned or leased by an interstate air courier, is apportioned under G.S. 105 -337
to the air courier's hub in this State, and is used in the air courier's operations in this State. For
the purpose of this subdivision, the terns "interstate air courier" and "hub" have the meanings
provided in G.S. 105- 164.3.
(25)
Tangible personal property shipped into this State for the purpose of repair, alteration,
maintenance or servicing and reshipment to the owner outside this State.
(26)
For the tax year immediately following transfer of title, tangible personal property
manufactured in this State for the account of a nonresident customer and held by the
manufacturer for shipment. For the purpose of this subdivision, the term "nonresident" means
a taxpayer having no place of business in North Carolina.
(27),
(28) Repealed by Session Laws 1983, c. 643, s. 1.
(29)
Real property and easements wholly and exclusively held and used for nonprofit historic
preservation purposes by a nonprofit historical association or institution, including real
property owned by a nonprofit corporation organized for historic preservation purposes and
held by its owner exclusively for sale under an historic preservation agreement to be prepared
and recorded, at the time of sale, under the provisions of the Conservation and Historic
Preservation Agreements Act, Article 4, Chapter 121 of the General Statutes of North
Carolina.
(29a)
Laird that is within an historic district and is held by a nonprofit corporation organized for
historic preservation purposes for use as a future site for an historic structure that is to be
moved to the site from another location. Property may be classified under this subdivision for
no more than five years. The taxes that would otherwise be due on land classified under this
subdivision shall be a lien on the real property of the taxpayer as provided in G.S. 105- 355(a).
The taxes shall be carried forward in the records of the taxing unit or units 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 an historic structure is not moved to the property within five years from
the first day of the fiscal year the property was classified under this subdivision. In addition to
the provisions in G.S. 105- 277.1F, all liens arising under this subdivision are extinguished
upon the location of an historic structure on the site within the time period allowed under this
subdivision.
(30)
Repealed by Session Laws 1987, c. 813, s. 5.
(31)
Intangible personal property other than a leasehold interest that is in exempted real property
and is not excluded under subdivision (31 e) of this section. This subdivision does not affect
the taxation of software not otherwise excluded by subdivision (40) of this section.
(31a)
through (31d) Repealed by Session Laws 1997 -23, s. 3.
(31e)
A leasehold interest in real property that is exempt under G.S. 105 -278.1 and is used to
provide affordable housing for employees of the unit of government that owns the property.
(32)
Recodified as G.S. 105- 278.6A by Session Laws 1998 -212, s. 29A.18(a), effective for taxes
unposed for taxable years beginning on or after July 1, 1998.
(32a)
Inventories owned by contractors.
(33)
Inventories owned by manufacturers.
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(34)
Inventories owned by retail and wholesale merchants. 32
(35)
Severable development rights, as defined in G.S. 136- 66,11(a), when severed and evidenced
by a deed recorded in the office of the register of deeds pursuant to G.S. 136- 66.11(c).
(36)
Repealed by Session Laws 2001 -474, s. 8, effective November 29, 2001.
(37)
Poultry and livestock and feed used in the production of poultry and livestock.
(38)
Repealed by Session Laws 2001 -474, s. 8, effective November 29, 2001.
(39)
Real and personal property that is: (i) owned by a nonprofit corporation organized upon the
request of a State or local government unit for the sole purpose of financing projects for
public use, (ii) leased to a unit of State or local government whose property is exempt from
taxation under G.S. 105 - 278.1, and (iii) used in whole or in part for a public purpose by the
unit of State or local government. If only part of the property is used for a public purpose,
only that part is excluded from the tax. This subdivision does not apply if any distributions are
made to members, officers, or directors of the nonprofit corporation.
(39a)
A correctional facility, including construction in progress, that is located on land owned by
the State and is constructed pursuant to a contract with the State, and any leasehold interest in
the land owned by the State upon which the correctional facility is located.
(40)
Computer software and any documentation related to the computer software. As used in this
subdivision, the term "computer software" means any program or routine used to cause a
computer to perform a specific task or set of tasks. The term includes system and application
programs and database storage and management programs.
The exclusion established by this subdivision does not apply to computer software and its
related documentation if the computer software meets one or more of the following
descriptions:
a. It is embedded software. "Embedded software" means computer instructions, known
as microcode, that reside permanently in the internal memory of a computer system or
other equipment and are not intended to be removed without terminating the operation
of the computer system or equipment and removing a computer chip, a circuit, or
another mechanical device.
b. It is purchased 'or licensed from a person who is unrelated to the taxpayer and it is
capitalized on the books of the taxpayer in accordance with generally accepted
accounting principles,-including financial accounting standards issued by the Financial
Accounting Standards Board. A person is unrelated to a taxpayer if (i) the taxpayer
and the person are not subject to any common ownership, either directly or indirectly,
and (ii) neither- the taxpayer nor the person has any ownership interest, either directly
or indirectly, in the other. The foregoing does not include development of software or
any modifications to software, whether done internally by the taxpayer or externally
by a third party, to meet the customer's specified needs.
This subdivision does not affect the value or taxable status of any property that is
otherwise subject to taxation under this Subchapter.
The provisions of the exclusion established by this subdivision are not severable. If any
provision of this subdivision or its application is held invalid, the entire subdivision is
repealed.
(41)
Repealed by Session Laws 2012 -120, s. 1(a), effective October 1, 2012.
(42)
A vehicle that is offered at retail for short-term lease or rental and is owned or leased by an
entity engaged in the business of leasing or renting vehicles to the general public for short-
term lease or rental. For the purposes of this subdivision, the term "short -term lease or rental"
shall have the same meaning as in G.S. 105- 187.1, and the term "vehicle" shall have the same
meaning as in G.S. 153A- 156(e) and G.S. 160A- 215.1(e). A gross receipts tax as set forth by
G.S. 153A -156 and G.S. 160A- 215.1 is substituted for and replaces the ad valorem tax
previously levied on these vehicles.
(42a)
Heavy equipment on which a gross receipts tax may be imposed under G.S. 153A -156.1 and
G.S. 160A- 215.2.
(43)
Real or tangible personal property that is subject to a capital lease pursuant to G.S. 115C -531.
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(44) Free samples of drugs that are required by federal law to be dispensed only on preription
and are given to physicians and other medical practitioners to dispense free of charge in the
course of their practice.
(45) Eighty percent (80 %) of the appraised value of a solar energy electric system. For purposes of
this subdivision, the term "solar energy electric system" means all equipment used directly
and exclusively for the conversion of solar energy to electricity.
(46) Real property that is occupied by a charter school and is wholly and exclusively used for
educational purposes as defined in G.S. 105- 278.4(f) regardless of the ownership of the
property.
(47) (Effective for taxes imposed for taxable years beginning on or after July 1, 2015) Energy
mineral interest in property for which a permit has not been issued under G.S. 113 -395. For
the purposes of this subdivision, "energy mineral" has the same meaning as in G.S. 105-
187.76.
(48) Real and personal property located on lands held in trust by the United States for the Eastern
Band of Cherokee Indians, regardless of ownership.
(49) (Effective for taxes imposed for taxable years beginning on or after July 1, 2018) A
mobile classroom or modular Ludt that is occupied by a school and is wholly and exclusively
used for educational purposes, as defined in G.S. 105- 278.4(f), regardless of the ownership of
the property. For the purposes of this subdivision, the term "school" means a public school,
including any school operated by a local board of education in a local school administrative
unit; a nonprofit charter school; a regional school; a nonprofit nonpublic school regulated
under Article 39 of Chapter 115C of the General Statutes; or a community college established
under Article 2 of Chapter 115D of the General Statutes. (1939, c. 310, s. 303; 1961, c. 1169,
s. 8; 1967, c. 1185; 1971, c. 806, s. 1; c. 1121, s. 3; 1973, cc. 290, 451; c. 476, s. 128; c. 484;
c. 695, s. 1; c. 790, s. 1; cc. 904, 962, 1028, 1034, 1077; c. 1262, s. 23; c. 1264, s. 1; 1975, cc.
566, 755; c. 764, s. 6; 1977, c. 771, s. 4; c. 782, s. 2; c. 1001, ss. 1, 2; 1977, 2nd Sess., c.
1200, s. 4; 1979, c. 200, s. 1; 1979, 2nd Sess., c. 1092; 1981, c. 86, s. 1; 1981 (Reg. Sess.,
1982), c; 1244, ss. 1, 2; 1983, c. 643, ss. 1, 2; c. 693; 1983 (Reg. Sess., 1984), c. 1060; 1985,
c. 510, s. 1; c. 656, s. 37; 1985 (Reg. Sess., 1986), c. 982, s. 18; 1987, c. 356; c. 622, s. 2; c.
747, s. 8; c. 777, s. 6; c. 813, ss. 5, 6, 22; c. 850, s. 17; 1987 (Reg. Sess., 1988), c. 1041, s.
1.1; 1989, c. 148, s. 4; c. 168, s. 6; c. 705; c. 723, s. 1; c. 727, ss. 28, 29; 1991, c. 717, s. 1;
1991 (Reg. Sess., 1992), c. 975, s. 2; 1993, c. 459, s. 2; 1993 (Reg. Sess., 1994), c. 745, s. 39;
1995, c. 41, s. 2; c. 509, s. 51; 1995 (Reg. Sess., 1996), c. 646, s. 12; 1997 -23, ss. 1, 3, 9;
1997 -443, s. 11A.119(a); 1997 -456, s. 27; 1998 -55, ss. 10, 18; 1998 -212, s. 29A.18(a); 1999-
337, s. 35(a); 2000 -2, s. 1; 2000 -18, s. 1, 2000 -140, ss. 71, 72(a); 2001 -84, s. 3; 2001 -427, s.
15(a); 2001 -474, s. 8; 2002 -104, s. 1; 2003 -284, s. 43A.1; 2007 -477, s. 1; 2007 -527, s. 37;
2008 -35, s. 2.1; 2008 -107, s. 28.11(a); 2008 -134, s. 72; 2008 -144, s. 1; 2008 -146, ss. 4.1, 5.1;
2008 -171, ss. 7(a), (b); 2009 -445, s. 21; 2010 -95, s. 15; 2011 -123, s. 1; 2011 -274, s. 1; 2012-
120, s. 1(a); 2013 -259, s. 1; 2013 -355, s. 3; 2013 -375, s. 3(a); 2014 -4, s. 18; 2015 -241, s.
14.30(u); 2015 -262, s. 1(a); 2016 -94, s. 38.6(a); 2017 -204, s. 5.4(a).)
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2014 BUSINESS PERSONAL PROPERTY LISTING FORM INSTRUCTIONS 34
ORANGE COUNTY TAX OFFICE
919- 245 -2100
THIS IS THE 2014 PERSONAL PROPERTY LISTING FORM TO LIST ALL BUSINESS PERSONAL PROPERTY OWNED ON JANUARY 1, 2014,
THIS FORM MUST BE FILED BY JANUARY 31, 2014. EXTENSIONS OF TIME IN WHICH TO LIST MAY BE OB'T'AINED BY SENDING A
WRITTEN REQUEST TO THE TAY DEPARTMENT BY JANUARY 31. FOR MORE INFORMATION, CALI, THE TAX OFFICE.
Electronic filing and requests for listing period extensions are accepted using the service provided by TAXscribe. Please visit www.taxscribe.conr
Commonly Asked Questions
Who must file a listing, and what do I list?
Any individual(s) or business(es) owning or possessing personal property
used or connected with a business or other income producing purpose on
January 1 must file a listing. Temporary absence of personal property from the
place at which it is normally taxable shall not affect this rule. For example, a
lawn tractor used for personal use to mow the lawn at your home is not listed.
However, a lawn tractor used as part of a landscaping business in this county
must be listed if the lawn tractor is normally in this county, even if it happens
to be in another state or county on January 1. PLEASE NOTE: This form
must be returned even ifyou have no property to list.
When and where to list?
Listings are due on or before January 31. As required by state law, late
listings will receive a penalty. An extension of time to list may be obtained by
sending a written request showing "good cause" to the Tax Office by January
31. Extensions will not be granted by telephone.
How do I list? Three important rules:
(1) Read the INSTRUCTIONS for each schedule or group. Contact your
county tax office if you need additional clarification.
(2) If a Schedule or Group does not apply to you, indicate so on the listing
form. DO NOT LEAVE A SECTION BLANK. DO NOT WRITE
"SAME AS LAST YEAR". A listing form may be rejected for these
reasons and could result in late listing penalties.
(3) Listings must be filed based on the tax district where the property is
physically located (a separate listint is required ner business location). if
you have received multiple listing forms, each form must be completed
separately.
Information Section
•
Filing status tatus — check the status that applies to your business
• Business category— type of business
• Physical address — location of the property. Post office boxes are not
acceptable.
• Contact person for audit — additional information or verification may be
obtained by contacting this person
• If out of business — list date ceased operation in county, and provide
information regarding new owner if applicable
Note: If you purchased an existing business and its assets since January 1,
2013 do not complete this listing form without first contacting the county
tax office for further instructions at 919 -245 -2100.
Schedule A — Personal Properth
Property included in this schedule is to be reported as of January 1.
Taxpayers with a fiscal year other than December 39 will have to update
their records to the January I reporting date.
The year acquired column: The rows which begin "2013" are the rows in
which you report property acquired during the calendar year 2013. Other years
follow the same format.
Schedule A contains eight (8) groups. Each is addressed below, List under
"Current Years Cost" the 100% cost of all depreciable personal property in
Your possession on January 1. Include all filly depreciated assets as well.
Please round announts to the nearest dollar. Use the "Additions" and
"Deletions" columns to explain changes from "Prior Yr. Cost" to "Current Yr.
Cost ". The "Prior Years Cost" plus "Additions" minus "Deletions" should
equal "Current Years Cost ". If there are any additions and /or deletions, please
note those under Schedule C, Detail of Acquisitions and Disposals. If the
deletion is a transferred or paid out lease, please note this, and to vvhonm the
property was transferred.
COST - Note that the cost information you provide must include all costs
associated with the acquisition as well as the costs associated with bringing
that property into operation. "These costs may include, but are not limited to
invoice cost, trade -in allowances, freight, installation costs, sales tax,
expensed costs, and construction period interest.
The cost figures reported should be historical cost; that is the original cost of
an item when first purchased, even if it was first purchased by someone other
than the current owner. For example, you, the current owner, may have
purchased equipment in 2003 for $100, but the individual you purchased the
equipment fron acquired the equipment in 1998 for $1000. You, the current
owner, should report the property as acquired in 1998 for $1000.
Property should be reported at its actual historical installed cost IF at the retail
level of trade. For example, a manufacturer of computers can make a certain
model for $1000 total cost. It is typically available to any retail customer for
$2000. If the manufacturer uses the computer for business purposes, he should
report the computer at its cost at the retail level of trade, which is $2000, not
the $1000 it actually cost the manufacturer. Leasing companies must list
property they lease at the retail trade level, even if their actual cost is at the
manufacturer or wholesaler level of trade.
Group (1) Machinery & Equipment
This is the group used for reporting the cost of all machinery and equipment.
This includes all store equipment, manufacturing equipment, production lines
(hi -tech or low- tech), as well as warehouse and packaging equipment.
Tractors, heavy farm machinery, heavy construction equipment, and logging
equipment should be listed in this section. All other farm equipment should
be listed in Schedule G. List the total cost by year of acquisition, including
filly depreciated assets that are still connected with the business.
For example, a manufacturer of textiles purchased a knitting machine in
October 2006 for $10,000. The sales tax was $200, shipping charges were
$200, and installation costs were $200. The total cost that the manufacturer
Should report is $10,600, if there were no other costs incurred. The $10,600
should be added in group ( I ) to the 2006 current year's cost column.
Group (2) Construction in Pro ress (CIP)
CIP is business personal property which is under construction on January 1.
The accountant will typically not capitalize the assets under construction until
all of the costs associated with the asset are known. In the interim period, the
accountant will typically maintain the costs of the asset in a CIP account. The
total of this account represents investment in personal property, and is to be
listed with the other capital assets of the business during the listing period.
Please list in detail. If you have no CIP, write "none ".
Group (3) Office Furniture & Fixtures
This group is for reporting the costs ofall furniture & fixtures and small office
machines used in the business operation. This includes, but is not limited to,
file cabinets, desks, chairs, adding machines, curtains, blinds, ceiling fans,
window air conditioners, telephones, intercom systems, and burglar alarm
systems.
Group (4) Computer Equipment
This group is for reporting the costs of non - production computers &
peripherals. This includes, but is not limited to, personal computers,
midrange, or mainframes, as well as the monitors, printers, scanners, magnetic
storage devices, cables, & other peripherals associated with those computers.
This category also includes software that is capitalized and purchased from an
unrelated business entity. Note: The development cost of software or any
modification cost to sofhvare, whether done internally by the taxpayer or
externally by a third party to meet the customer's specified needs is
excluded and should not be reported. This does not include high tech
equipment such as proprietary conmputerized point of sale equipment, high
tech medical equipment, computer controlled equipment, or the high -tech
Continued on Reverse
computer components that control the equipment. This type of equipment
would be included in Group (8) or "Other ".
Group (5) Improvements to Leased Property
This group includes improvements made by or for the business to real
property leased or used by the business. The improvements may or may not be
intended to remain in place at the end of the lease, but they trust still be listed
by the business unless it has been determined that the improvements will be
appraised as real property by the county for this tax year. Contact the county
to determine if you question whether these improvements will be appraised as
real property for this tax year. If you have made no improvements to leased
property write "none ". Do not include in this group any Store Equipment -
Group (1) or Office Furniture and Fixtures -Group (3).
Group (6) Expenditure Items
This group is for reporting any assets which would typically be capitalized,
but due to the business' capitalization threshold, they have been expensed.
Section 179 expensed items should be included in the appropriate group (1)
through (4). Fill in the blank which asks for your business' "Capitalization
Threshold." if you have no expensed items, write "none ".
Group (7) Supplies
Almost all businesses have supplies. These include normal business operating
supplies. List the cost on hand as of January I. Remember, the temporary
absence of property on January I does not mean it should not be listed if that
property is normally present. Supplies that are immediately consumed in the
manufacturing process or that become a part of the property being sold such
as packaging materials or raw materials for a manufacturer, do not have to be
listed. Even though inventory is exempt, supplies are not. Even if a business
carries supplies in an inventory account, they remain taxable.
Groan (8) Other
This group will not be used unless instructed by authorized county tax
personnel.
Schedule B — Unlicensed Vehicular Equipment, Multi -Year
and IRP Tagged Vehicles
All vehicles titled in your name on January I which are not licensed
should be reported in this section. Vehicles do not include fork lifts or
commercial and industrial tractor. These should be included under
machinery and equipment in Schedule A, Group (1).
The vehicle identification number (VIN) must be included for each vehicle. If
a body such as a dump truck, special equipment, or crane is mounted on the
vehicle, list the body separately showing the total installed cost and the year
acquired. If your records do not allow you to do this, you may list the truck
and body as one unit, but indicate you have done so.
*Important — All standard licensed vehicles will be billed through a separate
process, and therefore, should not be listed under Schedule B of this form.
However, all multi -year and IRP tagged vehicles should be listed.
Schedule C— Detail of Acquisitions and /or Disposals
All machinery, equipment, furniture, fixtures, and computers /software
acquired since January 1, 2013 should be itemized showing the total installed
cost of each item. in addition, all disposals made since January 1, 2013
Should be itemized in detail in the appropriate columns. IMPORTANT: The
acquisition year and original cost must be given for disposals.
Schedule D — Detail of Additions and /or Deletions to
Leasehold Improvements
Describe any additions or deletions to leasehold improvements taking care to
itemize so that real and personal property can be differentiated. State the
owner of the real property and its location. Please list any new construction or
improvements to real estate ifapplicable.
Fo-ft OC- FS5x11 -I01, APP: OCBUSI.S'I'
35
Schedule E — Lensed Property or Other Property in Your
Possession That Is Owned by Others
Leased Equipment — If you had any personal property owned by others in
Your possession on January 1, you must report the owner, property
description, lease information, and selling price new. Examples: copiers,
vending equipment, business machines, computers, machinery, furniture,
game machines, and postage meters.
Leased Vehicular Equipment— Report vehicles of all types that were in your
possession on January 1. Name of owner, year, make, vehicle identification
or serial number, date of lease, special bodies or equipment, and selling price
new must be given.
Schedule F— Other Miscellaneous Personal Property
Aircraft owned by you on January i must be reported showing the model year,
manufacturer, model or series, hanger or tic-down location, original cost, and
date acquired. Additional equipment and avionics not included in the original
cost should be listed separately.
Boats and boat motors owned by you on January i must be listed showing
year, make, size, marina or other location, date acquired and cost, including
any trade -in or equipment added.
Mobile homes or mobile offices owned by you on January i must be reported
showing year, make, size, mobile home park location, date acquired, and cost.
Schedule G— Resale Value of All Other Farm Equipment
Please state the January 1 resale value of all farm equipment not listed in
Schedule A, Group (1).
Schedule H— Billboards and Outdoor Advertising Structures
Please provide details regarding billboards and outdoor advertising structures
on a separate schedule 1-I -1 which may be obtained on Orange County's
websile: \vwnv.oran eg COLIntLaov /assessor
Affirmation
If the form is not signed by an authorized person, it will be rejected and could
be subject to penalties. The Affirmation section describes who may sign the
listing form.
Any person who willfully attempts, or who willfillly aids or abets any person
to attempt, in any manner to evade or defeat the taxes imposed under
Subchapter II of Chapter 105 of the Revenue Laws, whether by removal or
concealment of property or otherwise, shall be guilty of a Class 2
misdemeanor (punishable by imprisonment up to 6 months).
All listings are subject to being audited at any time. Returns are routinely
compared to state tax returns as filed with the North Carolina Department of
Revenue.
Mailing
Tax listing forms should be completed and returned to:
Orange County Tax Office
Business Section
P.O. Box 8181
Hillsborough, NC 27278
Listings submitted by mail are deemed to be tiled as of the date shown on the
postmark affixed by the U.S. Postal Service. If no date is shown on the
postmark, or if the postmark is not affixed by the U.S. Postal Service (for
instance your own postage meter) the listing shall be deemed to be filed when
received in the office ofthe assessor.
W.
LAW OFFICES
COLEMAN, GLEDHILL, HARGRAVE, MERRITT & RAINSFORD
A PROFFMIONALCORPORATION
129 E.TRYON STREET
FROMTHE DESK OF
P.O. DRAWER 1529
SAMUELE.COLEMAN
HILLSBOROUGH, NORTH CAROLINA 27278
DIRECT DIAL: 919- 732 -1201
919 - 732 -2196
TRAFFICICRIMINAL: 919- 732 -1200
919- 732 -7997 FAX
E- MAIL: scoteman0hillsboroughuclaw.com
wtiww.hillshoroughnclaw-com
7 r� y p
April 3, 2018
Donna Baker
Clerk of the Orange County Board of Commissioners
200 South Cameron Street
Hillsborough, North Carolina 27278
IN RE: Business Personal Property Tax Refund Request of Sports
Endeavors, Incorporated
Dear Mr. Roberts:
On behalf of my client, Sports Endeavors, Incorporated, I hereby serve you on
behalf of the Orange County Board of Commissioners pursuant to N.C. Gen. Stat. §
105 -381 the enclosed business personal property tax refund request. I have also
forwarded a copy of this request to Brenda Riley with the Orange County Tax
Office.
Res p ally,
Samuel E. Coleman,
Enclosures
SECljpm
37
NORTH CAROLINA RES- 2018 -040
ORANGE COUNTY
REFUND RESOLUTION (Denial)
Whereas, North Carolina General Statutes 105 -381 allows for the refund of taxes when the Board
of County Commissioners determines that a taxpayer applying for the refund has a valid defense to the tax
imposed; and
Whereas, the properties listed in the attached "Refund Request" has been taxed and the tax has
been collected: and
Whereas, as to the property listed in the Refund Request, the taxpayer has timely applied in
writing for a refund of the tax imposed but has not presented a valid defense to the tax imposed as indicated
on the Request for Property Tax Refunds.
NOW, THEREFORE, IT IS RESOLVED BY THE BOARD OF COUNTY
COMMISSIONERS OF ORANGE COUNTY THAT the property tax refund recommended for denial
are denied.
Upon motion duly made and seconded, the foregoing resolution was passed by the following votes:
Ayes: Commissioners
Nayes:
I, Donna Baker, Clerk to the Board of Commissioners for the County of Orange, North Carolina,
DO HEREBY CERTIFY that the foregoing has been carefully copied from the recorded minutes of the
Board of Commissioners for said County at a regular meeting of said Board held on
, said record having been made in the Minute Book of the minutes of said Board,
and is a true copy of so much of said proceedings of said Board as relates in any way to the passage of the
resolution described in said proceedings.
WITNESS my hand and the corporate seal of said County, this day of
Clerk to the Board of Commissioners