Williams Mullen: Recent Developments in North Carolina Property Tax

Williams Mullen: Recent Developments in North Carolina Property Tax

BY: CHARLES B. NEELY, JR., NANCY S. RENDLEMAN & ROBERT W. SHAW

North Carolina Court of Appeals Affirms Shopping Center Valuation by Property Tax Commission.

In a case decided on August 2, 2011, In re Appeal of Blue Ridge Mall LLC, No. COA10-1487 [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law], the Court of Appeals, in affirming the decision of the North Carolina Property Tax Commission ("PTC") lowering the assessed value of a regional mall, comprehensively summarized the law of North Carolina relating to the assessment of income producing properties, the burden of production and proof, and the review of a PTC decision by an appellate court under a whole record review.

The court reiterated prior holdings of the court on the taxpayer's burden of production, and rejected the County's contention that merely following its schedule of values was sufficient to show that the taxpayer had failed to rebut the presumption of correctness afforded an assessment.

The court also limited the application of the Supreme Court's holding in In re Appeal of Allred1 that a taxpayer's appraisal must correlate to the County's schedule of values, stating that the Allred ruling was applicable only to appeals for years in which a general reappraisal was not made.  The Allred rule did not apply in this case because the taxpayer was appealing from the County's general reappraisal of its property.

In determining a value for the property that was lower than the County's assessed value and higher than the taxpayer's appraiser's value, the PTC had applied a capitalization rate of 10.5 percent, a rate lower than the rate the taxpayer's appraiser had used in performing his appraisal. Both the taxpayer and the County appealed the use by the PTC of a rate for which there was no supporting direct testimony in the record.

Applying the whole record test, the court held that the capitalization rate determined by the PTC was supported by the evidence. The court noted that the PTC's capitalization rate fell within the range of capitalization rates relied upon by the appraiser, and that the PTC was free to adjust the capitalization rate used by the taxpayer's appraiser based on its finding that, in determining his capitalization rate, the appraiser had relied most heavily on the rate indicated by the sale of a mall that was substantially older than the subject property.

Qualifying property damages as a result of fire or explosion excluded from property tax.

The General Assembly has added a new class of property that is excluded from property tax.  Real and personal property that (1) is a contiguous tract of land previously used primarily for commercial or industrial purposes and which was damaged significantly as a result of a fire or explosion, (2) was donated to a nonprofit corporation by an entity other than an affiliate, and (3) has not been leased or sold by the nonprofit corporation is excluded from property tax.2  The new exclusion is effective for tax years beginning on or after July 1, 2011 and expires for tax years beginning on or after July 1, 2016.

Ownership requirements for property qualifying for present-use valuation revised.

The requirements for land owned by a business entity to qualify for present-use valuation have been revised.  Effective for tax years beginning on or after July 1, 2011, such land must have been owned by one or more of the following for the four years preceding January 1 of the year for which present-use valuation is claimed:

  1. The business entity,
  2. A member of the business entity, or
  3. Another business entity whose members include a member of the business entity that currently owns the land.3

Additionally, land owned by a trust must have been owned by the trust, or one or more of its creators, for the four years preceding January 1 of the year for which present-use valuation is claimed.4

Williams Mullen's North Carolina State and Local Tax Practice Group

If you have any questions or require additional information concerning any of these topics, please contact a member of Williams Mullen's North Carolina state and local tax practice group, which includes attorneys Nancy S. Rendleman, Charles B. Neely, Jr., Robert W. Shaw, and Doug G. Heron, as well as Angie Harris, Director of Government and Media Relations for North Carolina.


[1] 351 N.C. 1, 519 S.E.2d 52 (1999) [enhanced version] .

[2] N.C. Gen. Stat. § 105-275(7a) (codifying 2011 N.C. Sess. Laws ch. 123 § 1).

[3] N.C. Gen. Stat. § 105-277.3(b1)(1) (as revised by 2011 N.C. Sess. Laws ch. 9 § 1).

[4] N.C. Gen. Stat. § 105-277.3(b1)(2) (as revised by 2011 N.C. Sess. Laws ch. 9 § 1).

For more information about this topic, please contact the authors or any member of the Williams Mullen State & Local Tax Team.

© 2011 WILLIAMS MULLEN ALL RIGHTS RESERVED

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