State lawmakers on Tuesday advanced a proposal to limit property tax increases — putting the idea one step closer to a ballot referendum in November. 

The state House of Representatives’ Finance Committee on Tuesday gave a favorable report to a proposed state constitutional amendment restricting how much city and county governments could raise property taxes each year. The bill goes next to the House Rules Committee.

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Amendments to the state Constitution must be approved by North Carolina voters. If the idea is approved by a supermajority of legislators, North Carolinians would be asked to decide the issue through a ballot vote, likely in November. 

Legislative leaders said Tuesday they plan to adopt the proposal.

"Both chambers want to deliver additional tax relief to the citizens of North Carolina," Senate leader Phil Berger said when announcing that he and House Speaker Destin Hall had reached agreements on key details of a state budget.

The legislation, House Bill 1089, doesn’t outline a limit for property tax increases. It calls on state lawmakers to come up with specific restrictions at a later date — if the referendum is approved by voters.

The bill enjoyed bipartisan support among committee members, with Republicans and Democrats disagreeing over why the amendment is needed. 

Republicans accused city and county governments of raising taxes to pay for frivolous projects. “We don’t have a taxing problem, we have a spending problem,” said Rep. Keith Kidwell, R-Beaufort.

Democrats said many municipalities are raising taxes to fill budget holes created by a lapse in state funding, specifically for education. Legislative leaders failed to adopt a comprehensive state budget for the current fiscal year. “When you squeeze the balloon up top, that balloon is gonna pop out somewhere else,” said Rep. Eric Ager, D-Buncombe.

The proposed constitutional amendment is part of a broader push by legislators in the Republican-controlled General Assembly to address affordability issues ahead of the midterm elections. 

Republicans in the state Senate last week approved a bill that would temporarily block county governments from applying appraisals conducted during this calendar year to property tax bills. Reappraisals often lead to higher property tax bills. Republican Senate leader Phil Berger has referred to that proposal as a “moratorium” that could bring temporary relief to taxpayers in a number of counties scheduled to reappraise properties this year — including Guilford and Harnett. Berger has framed the idea as simply buying time for the legislature to come up with more sweeping reforms.

The proposed constitutional amendment could serve as that more sweeping idea, although it’s unclear if the Senate will go along if the idea passes the House.

Tax reduction has been a stated goal of Republican lawmakers for decades, but the proposed reappraisal moratorium and constitutional amendment are not guaranteed to pass. Neither Berger nor House Speaker Destin Hall has committed to supporting the other chamber’s idea for addressing rising property taxes.

Democrats have expressed skepticism over both plans. Senate Minority Leader Sydney Batch, D-Wake, chided Senate Republicans last week for failing to take up an amendment to Berger’s bill that would have lowered the state’s income threshold to qualify for property tax exceptions.

Rep. Lindsey Prather, D-Buncombe, said Monday — during a press conference calling for higher taxes on millionaires — that the property tax changes being proposed by GOP lawmakers seemed aimed more at gathering political credit than solving a problem.

“We can be the quote-unquote ‘good guys’ down here in Raleigh and say we're going to lower your property taxes,” Prather said. “But all that means is that the local governments are going to have to be the ‘bad guys’ to raise revenue in other ways.”

Closing a loophole

The House Finance committee on Tuesday also advanced a proposal that could help municipal governments recoup more property tax revenue. The committee gave a favorable report to  House Bill 1042, which would tighten rules for nonprofit organizations that receive property tax exemptions. The bill goes next to the House Rules Committee.

The state currently allows certain organizations to avoid paying property taxes if they use their property entirely for charitable purposes and are not run for profit. However, some developers have identified a loophole in the law that allows them to build housing with a minimal number of affordable units. State Rep. Erin Pare, R-Wake, said the loophole enabled developers to keep nearly $750 million worth of property out of Wake County’s tax base in 2025. 

The proposed change seeks to winnow down the list of who qualifies, especially nonprofits that provide affordable housing for low- or moderate-income people. “The intent of this work is to preserve the affordable housing exemption … and to sure there is a public benefit to providing this exemption,” Pare told the committee.