AN ACT to increase the benefit of the property tax homestead exclusion by raising both the income eligibility limit and the amount excluded from taxation; to Authorize the revenue laws study committee to study whether and how to index the minimum amount that is excluded from tax; to create a senior circuit breaker property tax benefit; to modify the present‑use value requirements for agricultural land used as an aquatic species farm; and to Authorize the revenue laws study committee to study various modifications and expansions to the present‑use value system.

The General Assembly of North Carolina enacts:

Part i.  property tax homestead exclusion modification
SECTION 1.1.  G.S. 105‑277.1 reads as rewritten:
"§ 105‑277.1.  Property tax homestead exclusion.
(a)	Exclusion. – A permanent residence owned and occupied by a qualifying owner is designated a special class of property under Article V, Sec. 2(2) of the North Carolina Constitution and is taxable in accordance with this section. The amount of the appraised value of the residence equal to the exclusion amount is excluded from taxation. The exclusion amount is the greater of twenty‑five thousand dollars ($25,000) or fifty percent (50%) of the appraised value of the residence. A qualifying owner is an owner who meets all of the following requirements as of January 1 preceding the taxable year for which the benefit is claimed:
(1)	Is at least 65 years of age or totally and permanently disabled.
(2)	Has an income for the preceding calendar year of not more than the income eligibility limit.
(3)	Is a North Carolina resident.
(a1)	Temporary Absence. – An otherwise qualifying owner does not lose the benefit of this exclusion because of a temporary absence from his or her permanent residence for reasons of health, or because of an extended absence while confined to a rest home or nursing home, so long as the residence is unoccupied or occupied by the owner's spouse or other dependent.
(a2)	Income Eligibility Limit. – Until July 1, 2008, the income eligibility limit is twenty‑five thousand dollars ($25,000). For taxable years beginning on or after July 1, 2008, the income eligibility limit is the amount for the preceding year, adjusted by the same percentage of this amount as the percentage of any cost‑of‑living adjustment made to the benefits under Titles II and XVI of the Social Security Act for the preceding calendar year, rounded to the nearest one hundred dollars ($100.00). On or before July 1 of each year, the Department of Revenue must determine the income eligibility amount to be in effect for the taxable year beginning the following July 1 and must notify the assessor of each county of the amount to be in effect for that taxable year.
(b)	Definitions. – The following definitions apply in this section:
(1)	Code. – The Internal Revenue Code, as defined in G.S. 105‑228.90.
(1a)	Income. – All moneys received from every source other than gifts or inheritances received from a spouse, lineal ancestor, or lineal descendant. For married applicants residing with their spouses, the income of both spouses must be included, whether or not the property is in both names.
(1b)	Owner. – A person who holds legal or equitable title, whether individually, as a tenant by the entirety, a joint tenant, or a tenant in common, or as the holder of a life estate or an estate for the life of another. A manufactured home jointly owned by husband and wife is considered property held by the entirety.
(2)	Repealed by Session Laws 1993, c. 360, s. 1.
(2a)	Repealed by Session Laws 1985 (Reg. Sess., 1986), c. 982, s. 20.
(3)	Permanent residence. – A person's legal residence. It includes the dwelling, the dwelling site, not to exceed one acre, and related improvements. The dwelling may be a single family residence, a unit in a multi‑family residential complex, or a manufactured home.
(4)	Totally and permanently disabled. – A person is totally and permanently disabled if the person has a physical or mental impairment that substantially precludes him or her from obtaining gainful employment and appears reasonably certain to continue without substantial improvement throughout his or her life.
(c)	Application. – An application for the exclusion provided by this section should be filed during the regular listing period, but may be filed and must be accepted at any time up to and through June 1 preceding the tax year for which the exclusion is claimed. When property is owned by two or more persons other than husband and wife and one or more of them qualifies for this exclusion, each owner must apply separately for his or her proportionate share of the exclusion.
(1)	Elderly Applicants. – Persons 65 years of age or older may apply for this exclusion by entering the appropriate information on a form made available by the assessor under G.S. 105‑282.1.
(2)	Disabled Applicants. – Persons who are totally and permanently disabled may apply for this exclusion by (i) entering the appropriate information on a form made available by the assessor under G.S. 105‑282.1 and (ii) furnishing acceptable proof of their disability. The proof must be in the form of a certificate from a physician licensed to practice medicine in North Carolina or from a governmental agency authorized to determine qualification for disability benefits. After a disabled applicant has qualified for this classification, the applicant is not required to furnish an additional certificate unless the applicant's disability is reduced to the extent that the applicant could no longer be certified for the taxation at reduced valuation.
(d)	Multiple Ownership. – A permanent residence owned and occupied by husband and wife as tenants by the entirety is entitled to the full benefit of this exclusion notwithstanding that only one of them meets the age or disability requirements of this section. When a permanent residence is owned and occupied by two or more persons other than husband and wife and one or more of the owners qualifies for this exclusion, each qualifying owner is entitled to the full amount of the exclusion not to exceed his or her proportionate share of the valuation of the property. No part of an exclusion available to one co‑owner may be claimed by any other co‑owner and in no event may the total exclusion allowed for a permanent residence exceed the exclusion amount provided in this section."
SECTION 1.2.  The Revenue Laws Study Committee may study the issue of whether to index the minimum excluded appraised value limit in the property tax homestead exclusion in G.S. 105‑277.1 and, if so, which index to use.   
SECTION 1.3.  Section 1.1 of this act is effective for taxes imposed for taxable years beginning on or after July 1, 2008.  The remainder of this section is effective when it becomes law.
Part II.  Senior circuit breaker property tax benefit
SECTION 2.1.  G.S. 105‑277.1(b) is amended by adding a new subdivision to read:
"(b)	Definitions. – The following definitions apply in this section:
…
(3a)	Property tax relief. – The property tax homestead exclusion provided in this section or the property tax homestead circuit breaker provided in G.S. 105‑277.1B.
…."
SECTION 2.2.  G.S. 105‑277.1 is amended by adding a new subsection to read:
"§ 105‑277.1.  Property tax homestead exclusion.
…
(e)	Election. – An owner who qualifies for both kinds of property tax relief may elect the property tax homestead circuit breaker under G.S. 105‑277.1B instead of the property tax homestead exclusion provided in this section. When property is owned by two or more persons, each person must qualify for both kinds of property tax relief and must elect the property tax homestead circuit breaker in order for the property tax homestead circuit breaker to be allowed instead of the property tax homestead exclusion."
SECTION 2.3.  Article 12 of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105‑277.1B.  Property tax homestead circuit breaker.
(a)	Classification. – A permanent residence owned and occupied by a qualifying owner is designated a special class of property under Article V, Section 2(2) of the North Carolina Constitution and is taxable in accordance with this section.
(b)	Definitions. – The definitions provided in G.S. 105‑277.1 apply to this section.
(c)	Income Eligibility Limit. – The income eligibility limit provided in G.S. 105‑277.1(a2) applies to this section.
(d)	Qualifying Owner. – For the purpose of qualifying for the property tax homestead circuit breaker under this section, a qualifying owner is an owner who meets all of the following requirements as of January 1 preceding the taxable year for which the benefit is claimed:
(1)	The owner has an income for the preceding calendar year of not more than one hundred fifty percent (150%) of the income eligibility limit specified in subsection (c) of this section.
(2)	The owner has occupied the property as a permanent residence for at least five years.
(3)	The owner is at least 65 years of age or totally and permanently disabled.
(4)	The owner is a North Carolina resident.
(e)	Multiple Owners. – When a permanent residence is owned and occupied by two or more persons other than husband and wife, no property tax homestead circuit breaker is allowed unless all of the owners qualify and elect to defer taxes under this section.
(f)	Tax Limitation. – A qualifying owner may defer the portion of tax imposed on his or her permanent residence if it exceeds a percentage of the qualifying owner's income as provided in this section.
	Income	Percentage
Less than the income eligibility limit	4.0%
100% to 150% of the income eligibility limit	5.0%(g)	Temporary Absence. – An otherwise qualifying owner does not lose the benefit of this circuit breaker because of a temporary absence from his or her permanent residence for reasons of health, or because of an extended absence while confined to a rest home or nursing home, so long as the residence is unoccupied or occupied by the owner's spouse or other dependent.
(h)	Deferred Taxes. –  The difference between the taxes due under this section and the taxes that would have been payable in the absence of this section are a lien on the real property of the taxpayer as provided in G.S. 105‑355(a). The difference in taxes for the three fiscal years preceding the current tax year shall be carried forward in the records of the taxing unit or units as deferred taxes. Interest accrues on the deferred taxes due as if they had been payable on the dates on which they originally became due. On or before September 1 of each year, the assessor shall notify each residence owner to whom a tax deferral has previously been granted of the accumulated sum of deferred taxes and interest.
(i)	Disqualifying Events. – Taxes deferred under this section are payable within nine months after a disqualifying event. The tax for the fiscal year that opens in a calendar year in which deferred taxes become due is computed as if the property was not eligible for property tax relief under this section. Each of the following constitutes a disqualifying event:
(1)	The owner transfers the residence. Transfer of the residence under this subdivision is not a disqualifying event if (i) the owner transfers the residence as part of a divorce proceeding to either his or her spouse who qualifies for tax deferral under this section or to a co‑owner of the residence, (ii) that individual occupies or continues to occupy the property as his or her permanent residence, and (iii) that individual elects to continue deferring payment of the tax.
(2)	The owner dies. Death of the owner under this subdivision is not a disqualifying event if (i) the owner's share passes to either his or her spouse who qualifies for tax deferral under this section or to a co‑owner of the residence, (ii) that individual occupies or continues to occupy the property as his or her permanent residence, and (iii) that individual elects to continue deferring payment of the tax.
(3)	The owner ceases to use the property as a permanent residence.
(j)	Interruption of Qualification. – If the owner of a tax‑deferred residence does not qualify under this section for deferral as of January 1 preceding a taxable year for reasons other than a disqualifying event or if the owner of a tax‑deferred residence revokes an application for deferral by notifying the assessor in writing, the owner may not defer any additional property taxes under this section without submitting a new application. Deferred taxes from earlier years do not become due because of an interruption of qualification; however, deferred taxes existing at the time of an interruption of qualification shall be carried forward until the occurrence of a disqualifying event. If the owner qualifies for tax deferral under this section following an interruption of qualification, the taxing unit or units shall disregard the years during which there was an interruption of qualification for purposes of determining the three fiscal years preceding the current tax year under subsection (g) of this section.
(k)	Prepayment. – All or part of the deferred taxes and accrued interest may be paid to the tax collector at any time. Any partial payment is applied first to accrued interest. A residence owner to whom a tax deferral has previously been granted may revoke the application for deferral at any time by notifying the assessor in writing. 
(l)	Creditor Limitations. – A mortgagee or trustee that elects to pay any tax deferred by the owner of a residence subject to a mortgage or deed of trust does not acquire a right to foreclose as a result of the election. Except for requirements dictated by federal law or regulation, any provision in a mortgage, deed of trust, or other agreement that prohibits the owner from deferring taxes on property under this section is void.
(m)	Construction. – This section does not affect the attachment of a lien for personal property taxes against a tax‑deferred residence.
(n)	Application. – An application for property tax relief provided by this section should be filed during the regular listing period, but may be filed and must be accepted at any time up to and through June 1 preceding the tax year for which the relief is claimed. Persons may apply for this property tax relief by entering the appropriate information on a form made available by the assessor under G.S. 105‑282.1."
SECTION 2.4.  G.S. 105‑282.1(a)(2) reads as rewritten:
"(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), (35), (36), (38), (39), or (41) 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, 105‑277.10, 105‑277.13, 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.	Special classes of property eligible for tax relief under G.S. 105‑277.1B."
SECTION 2.5.  G.S. 105‑309(f) reads as rewritten:
"(f)	The assessor must print a homestead tax relief notice on each abstract or on an information sheet distributed with the abstract. The abstract or sheet must include the address and telephone number of the assessor below the notice required by this section. The notice must be in the form required by the Department of Revenue designed to notify the taxpayer of his or her rights and responsibilities under the homestead property tax exclusion provided in G.S. 105‑277.1 and the property tax homestead circuit breaker provided in G.S. 105‑277.1B.
"
SECTION 2.6.  This section is effective for taxes imposed for taxable years beginning on or after July 1, 2009.
Part iii.  aquatic species farm modifications to puv
SECTION 3.1. G.S. 105‑277.3(a)(1) reads as rewritten:
"(1)	Agricultural land. – Individually owned agricultural land consisting of one or more tracts, one of which satisfies the requirements of this subdivision. For agricultural land used as a farm for aquatic species, as defined in G.S. 106‑758, the tract must meet the income requirement for agricultural land and must consist of at least five acres in actual production or produce at least 20,000 pounds of aquatic species for commercial sale annually, regardless of acreage. For all other agricultural land, the tract must meet the income requirement for agricultural land and must consist of at least 10 acres that are in actual production. Land in actual production includes land under improvements used in the commercial production or growing of crops, plants, or animals. 
To meet the income requirement, agricultural land must, for the three years preceding January 1 of the year for which the benefit of this section is claimed, have produced an average gross income of at least one thousand dollars ($1,000). Gross income includes income from the sale of the agricultural products produced from the land, any payments received under a governmental soil conservation or land retirement program, and the amount paid to the taxpayer during the taxable year pursuant to P.L. 108‑357, Title VI, Fair and Equitable Tobacco Reform Act of 2004. "
SECTION 3.2.    This section is effective for taxes imposed for taxable years beginning on or after July 1, 2008.  
part iv.  tax relief study for nondevelopmental property
SECTION 4.1.  The General Assembly finds that increases to property tax values in this State resulting from real estate development often make it difficult for owners who do not want to develop their property to continue to use their property for farming or other nondevelopmental purposes.  The Revenue Laws Study Committee may study ways to address the inability of landowners to pay escalating property taxes while maintaining nondevelopmental uses.  The study may include a review of the following:
(1)	Implementing tax benefits for donating perpetual easements on property to ensure continuation of nondevelopmental uses.
(2)	Extending present‑use value benefits to property that is used for wildlife conservation.
(3)	Other ways to reduce property taxes to preserve property used for farmland and other nondevelopmental uses.
SECTION 4.2.  The Revenue Laws Study Committee may report its findings on the issues in this act, including any recommendations or legislative proposals, to the 2008 Regular Session of the General Assembly.
SECTION 4.3.  This section is effective when it becomes law.
In the General Assembly read three times and ratified this the 2nd day of August, 2007.

	s/	 Beverly E. Perdue
	 President of the Senate

	s/	 Joe Hackney
	 Speaker of the House of Representatives

	s/	 Michael F. Easley
	 Governor

Approved 12:48 p.m. this 30th day of August, 2007