NC House Advances Bills to Close Tax Loophole, Fund UNC Construction
House votes unanimously to close affordable housing tax loophole that costs local governments millions annually.
RALEIGH, NORTH CAROLINA — The North Carolina House voted unanimously Tuesday to advance legislation aimed at closing a property tax loophole for affordable housing developments, potentially generating additional revenue for local governments.
House Bill 1042, titled “Affordable Housing Exemption Mods,” is projected to increase local government revenue by $22 million next fiscal year and $32.6 million by fiscal year 2030-31, according to estimates from the General Assembly’s Fiscal Research Division. The House is scheduled to take a final vote on the bill Wednesday.
Loophole Stems from 2013 Court Ruling
The tax exemption issue originated from a 2013 North Carolina Court of Appeals case involving Cane Creek Village, a low-income housing project in Mitchell County. The court ruled that the development, owned by a for-profit company but controlled by a nonprofit organization, qualified for property tax exemptions under state law.
Rep. Erin Paré (R-Wake), the bill’s primary sponsor, said tax administrators across North Carolina have seen a significant increase in applications for existing low- and moderate-income tax breaks over the past five years.
“The trajectory forward is particularly problematic as applications rise and the foregone revenue burden gets passed on to other mostly residential taxpayers,” Paré said.
Stricter Requirements for Tax Benefits
Under the proposed legislation, for-profit organizations partnering with nonprofits to receive tax benefits would face more stringent requirements. Such partnerships would need government funding to ensure affordability, according to previous NC Newsline reporting.
The measure aims to prevent abuse of tax exemptions while maintaining legitimate affordable housing incentives.
UNC System Construction Funding Approved
In separate legislative action Tuesday, the House voted near-unanimously to approve $636 million in construction projects across five University of North Carolina system campuses. House Bill 1123 received support from every member except Rep. Pricey Harrison (D-Guilford).
The construction funding will support new student housing, dining facilities, and parking infrastructure across the UNC system campuses.
Both measures now move to the state Senate for consideration as part of the General Assembly’s ongoing legislative session.
