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New Real Property Exclusion
Chris McLaughlin
Associate Professor, UNC SOG
919.843.9167
Fall 2015
Over the past three years, which of these “Big Four” ACC football teams has won the most games?
21. 2. 3. 4.
0% 0%0%0%
1. Duke
2. UNC
3. NC State
4. Wake Forest
Who says we’re a basketball school?
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S.L. 2015-223H168
G.S. 105-277.02
• New exclusion for improvements to real property that is held for sale
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G.S. 105-277.02
• Real property held for sale– Commercial or Residential
• Excludes property taxes on increases in value due to:– Subdivision– Non-structural improvements (grading, streets)– New home construction
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Residential Property
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x
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x
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Commercial Property
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Residential Property:What is Excluded?• The taxes on the increase in value of
property held for sale attributed to:
1.Subdivision
2.Non-structural improvements
3.Construction of 1- or 2-family houses
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Residential Property:How Long is the Exclusion?
• 3 years from the date the improved property was first listed
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Residential Property:How Long is the Exclusion?• Parcel A subdivided and graded in July 2016
• Improved parcel first listed 2017
• Tax appraisal of improved Parcel A increases for 2017-2018 year
• Exclusion may cover 2017, 2018, and 2019
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Residential Property:What Terminates the Exclusion?• Sale
• Removal from the market
• Lease to a tenant
• Use for commercial purpose (model home)
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Residential Property:No Effect on Exclusion
• Builder occupies house
• Third-party occupies house for free?
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Commercial Property:What is Excluded?• The taxes on the increase in value of
property held for sale attributed to:
1.Subdivision
2.Non-structural improvements
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Commercial Property:How Long is the Exclusion?
• 5 years from the date the improved property was first listed
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Commercial Property:What Terminates the Exclusion?
• Issuance of building permit
• Sale
• Removal from market
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Differences Between Residential and Commercial
Exclusion
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• Structural improvements only for residential
• 3 years for residential
• 5 years for commercial
Similarities BetweenResidential and Commercial
Exclusion
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• Builder: “a taxpayer engaged in the business of buying real property, making improvements to it, and then reselling it.”
• Annual application (GS 105-282.1)
Similarities BetweenResidential and Commercial
Exclusion
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• Applies to improvements made on after July 1, 2015
• 2016 first tax year available
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