Senate Bill 695 creates a new property tax exclusion for certain “qualified development” property located in an “incentive district” and held for sale by a builder. The bill excludes 90% of the appraised value of eligible property from taxation, with the exclusion ending when the property is sold or after 10 years, whichever comes first. To qualify, the district must be proposed by a developer, approved by the local governing body, and be an area that could support project development financing debt instruments under existing law.
The bill is intended to encourage private developer participation in local development projects and to grow the property tax base of local governments over time. It also bars property receiving the new exclusion from simultaneously receiving property tax relief under the existing homestead/property tax relief provision in G.S. 105-277.02. The bill applies prospectively to taxes imposed for taxable years beginning on or after July 1, 2026.
Impact
S695 amends Chapter 105 of the North Carolina General Statutes by adding a new special property tax classification in G.S. 105-277.03, cross-referencing it in the property tax application statute, and coordinating it with the existing property tax relief statute so the two benefits cannot be combined. It affects builders, developers, and local governments by creating a temporary tax incentive for eligible development property in approved incentive districts, while limiting the size of such districts to no more than 5% of a local government’s total area. The act would take effect for taxable years beginning on or after July 1, 2026.
Sentiment
The available voting history suggests strong support for the bill, with the Senate passing second reading 42-0. No committee transcript is available, but the bill’s purpose and unanimous vote indicate a generally favorable view of using targeted tax incentives to promote development and expand the local tax base. The absence of recorded opposition in the provided materials suggests broad bipartisan or at least noncontroversial support at this stage.
Contention
The main policy tension is between using property tax exclusions to stimulate development and preserving the property tax base and fairness of the tax system. Potential concerns include whether the 90% exclusion is too generous, whether local governments should grant developers this kind of preferential treatment, and whether the incentive could overlap with or displace existing property tax relief programs. Another possible point of debate is the definition and size of an incentive district, since local approval and the five-percent area cap give governments some control but also raise questions about land-use discretion and the scope of the program.
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