NC House Committee Backs Constitutional Amendment to Limit Local Property Tax Levies

RALEIGH, NC – A North Carolina House committee on Wednesday advanced a proposed constitutional amendment that would significantly alter how local governments can increase property tax collections, potentially placing limits tied to inflation and population growth on future levies. The House Select Committee on Property Tax Reduction and Reform voted to recommend the measure, which, if approved by the full General Assembly, would appear on the statewide ballot for voters to decide on November 3, 2026. The proposal aims to address widespread frustrations among property owners regarding rising tax bills, empowering the General Assembly to establish statewide caps on the revenue local jurisdictions can collect from property taxes. This marks a notable shift from the current system, where local elected officials largely control property tax rates, which are a primary source of county revenue. For small and mid-sized businesses across North Carolina, this legislative push represents a double-edged sword. On one hand, predictable limits on property tax increases could provide much-needed stability in operating costs, allowing for better financial planning and potentially freeing up capital for investment, expansion, or employee wages. Property taxes, whether paid directly on owned commercial real estate or indirectly through lease agreements, are a substantial overhead for many enterprises. However, the potential for state-mandated caps to restrict local government revenue could also lead to reduced funding for essential local services – such as infrastructure maintenance, public safety, and educational programs – that businesses rely on for a stable operating environment and a skilled workforce. Striking this balance between tax relief and service provision will be crucial. We at C&S Finance Group LLC understand the complexities these legislative changes introduce for business owners. Navigating evolving tax landscapes and understanding their precise financial implications is a core part of our expertise in tax preparation and compliance. We help clients anticipate and adapt to such shifts, ensuring they remain compliant while optimizing their financial strategies. Business owners seeking guidance on how these potential changes could impact their operations are encouraged to contact C&S Finance Group LLC at csfinancegroup.com to explore proactive planning strategies. Under the committee's proposal, the General Assembly would be mandated to enact laws limiting the amount by which the levy on property may increase. While the specifics of these limits are yet to be defined, discussions within the committee, including comments from Speaker of the House Destin Hall, suggest they would likely be linked to economic indicators such as inflation and population growth. The plan also includes provisions that would allow local governments to exceed these state-imposed limits under certain conditions, such as when such increases are directly approved by local voters. The impetus for this amendment stems from concerns over what proponents describe as unsustainable property tax growth. Rep. Brian Echevarria (R-Cabarrus), who introduced the proposal on Wednesday, highlighted data indicating significant increases. He noted that property taxes have typically risen by 50% to 60% since 2020, while inflation has climbed by approximately 30% over the same period. This disparity, Echevarria argued, underscores the need for legislative intervention to address increases driven by both rising tax rates and soaring property valuations across the state. Further supporting this perspective, data from the John Locke Foundation, referenced by proponents, suggests that nine of North Carolina’s ten most populous counties collectively collected nearly $3 billion more in property taxes over the last decade than would have been anticipated based solely on inflation and population growth. Public sentiment appears to align with these concerns, as polling cited in a release indicated that 76.8% of respondents perceive property taxes as a burden on their household budgets, with 73.2% expressing support for a constitutional amendment to limit increases. Despite the broad support among committee members, the proposal has drawn criticism from some lawmakers who argue it oversimplifies a complex issue and could have detrimental effects on local communities. Rep. Eric Ager (D-Buncombe) voiced concerns that imposing state-level limits on local tax levies would inevitably force local governments to cut essential services. Ager contended that the state legislature has increasingly shifted fiscal burdens onto localities by reducing state-level spending, leaving local governments “holding the bag” and struggling to fund crucial services like fire departments, law enforcement agencies, and schools without adequate state support. Rep. Maria Cervania (D-Wake) echoed these sentiments, describing the proposed legislative control over property tax limits as an “overly simple solution to a complicated problem.” She emphasized that the proposal does not adequately account for the role of property appraisals in driving up tax bills, suggesting a more nuanced approach is required. Critics also point out that the state government already possesses the authority to set maximum tax rates for local governments, with North Carolina law currently capping rates at $1.50 per $100 of assessed value—a limit that no county in the state has yet reached, according to Christopher McLaughlin, a professor of Public Law and Government at the University of North Carolina’s School of Government. McLaughlin further questioned the enforceability of the proposed amendment, noting that it merely states the General Assembly “shall” pass limits on property tax levies without specifying the timeframe, manner, or type of limits. He suggested that such vague language could render the amendment “completely unenforceable.” Opponents also argue that giving the state more control over property taxes implies that the state knows better than local voters, potentially hindering the ability of financially struggling communities to raise necessary funds for local improvements, such as road repairs. In addition to the constitutional amendment, the House committee also advanced a separate bill aimed at closing a loophole related to property tax exemptions for nonprofit organizations. This proposal seeks to narrow the criteria for tax exemptions, particularly for apartment owners who currently claim exemptions for properties meeting affordable housing limits, provided a portion of the property is owned by a nonprofit. The change is intended to refine the list of qualifying organizations, especially those providing affordable housing for low- or moderate-income individuals. WRAL previously reported that such affordable housing tax breaks kept approximately $750 million worth of property out of county tax bases in 2025 alone. For small and mid-sized businesses, particularly those engaged in real estate development, property management, or social enterprise models involving affordable housing, the changes to tax exemption rules could have direct financial implications. Understanding the revised eligibility criteria will be critical for compliance and strategic planning. The dual focus on limiting general property tax increases and refining specific exemptions highlights a comprehensive legislative effort to reshape North Carolina's property tax landscape. Both proposals now face the challenge of securing a three-fifths vote in both the full House and Senate during the upcoming short legislative session. If successful, the constitutional amendment would then await voter approval in November 2026, setting the stage for significant changes to North Carolina’s fiscal framework.