Transcript Review and Compliance of Exempt and Excluded Property Kimberly Simpson – Durham County Tax Administrator Heather Scheel – North Carolina Department of Revenue.

Review and Compliance of Exempt and Excluded
Property
Kimberly Simpson – Durham County Tax
Administrator
Heather Scheel – North Carolina
Department of Revenue
Next 50 Minutes
• Review/ Annual Review and 1/8 Verification of
NC Exemptions (105-278), Exclusions and
Deferments (105-275, 276 & 277)
– NOT
• PUV (Present Use Value)
– Somewhat (Audit/Compliance)
» EDV/CB (Elderly, Disabled Vet or Circuit Breaker)
Agenda
– Legal Framework
• General Processes
– Case Study – Durham County
• Audit & Review Process
– 2011 Legislation
– Best Practices/Lessons Learned
Legal Framework
• NC Law – Machinery Act
• Taxpayer Responsibility
– Privilege
– Application
• Assessor’s Duty
– Approve & Appeal
– Review & Audit
– Discover & Report
Legal Framework
• 105-274 – Property Subject to Taxation - All
property…shall be subject to taxation unless it
is:
– (1)
Excluded…under the classification power
accorded the General Assembly by Article V, §
2(2), of the North Carolina Constitution, or
– (2)
Exempted by a statute of statewide
application enacted under the authority granted
the General Assembly by Article V, § 2(3), of the
North Carolina Constitution.
Legal Framework
• Taxpayer Responsibility
– 105-282.1 - Every owner of property claiming
exemption or exclusion from property taxes under
the provisions of this Subchapter has the burden
of establishing that the property is entitled to it.
– 105-282.1(a) – annually during listing period
Legal Framework
• Taxpayer Responsibility
– 105-282.1 - Every owner of property claiming
exemption or exclusion from property taxes under
the provisions of this Subchapter has the burden
of establishing that the property is entitled to it.
• Privilege not a right
• Must at least identify exemption or exclusion sought on
application
• If multi-part test – all must be met (ownership & use) or Historic
Properties § 105-278 need ordinance under § 160A-400.5.
Legal Framework
• Taxpayer Responsibility
– 105-282.1(a) – annually during listing period
– Except….
Legal Framework
§105-282.1(a)1
• No application required. – Owners of the following
exempt or excluded property do not need to file an
application for the exemption or exclusion to be
entitled to receive it:
– a.
Property exempt from taxation under G.S.
105-278.1 or G.S. 105-278.2.
– b.
Special classes of property excluded from taxation
under G.S. 105-275(15), (16), (26), (31), (32a), (33), (34),
(37), (40), (42), or (44).
– c.
Property classified for taxation at a reduced
valuation under G.S. 105-277(g) or G.S. 105-277.9.
Legal Framework
• Single Application Required
– § 105-282.1(2)
• Certain Exempted property
• Special Classes
• G.S. § 277.8 (non-profit homeowner’s association)
– See Quick Charts (next two slides)
General Assemble or NC Constitution
Article V, §2 (2) Exclusions from Tax
Deferments
Article V,§2(3) Exemptions from Taxation
§ 105-275 – Excluded from Tax Base
§ 105-277.1D
(Builders Inventory)
§ 105-278.1
(government owned)
§ 105-276 – Intangible PP
§ 105-277.1F
(general provisions)
§ 105-278.2
(Burial Property)
Reduced Rates/Valuation
§ 105-277.14
(working waterfront)
§ 105-278.3
(Religious Purposes)
§ 105-277
§ 105-277.15
(wildlife conservation)
§ 105-278.4
(Educational)
§ 105-277.01
§ 105-278
(Historic Properties)
§ 105-278.5
(Religious & Educational)
§ 105.277.8 (Homeowners Association)
§ 105-278.6(e) (Future Site)
§ 105-278.6
(Charitable)
§ 105.277.9 (Roadway Corridors)
§ 105-278.7
or Charitable)
(Educational, scientific, literary
§ 105.277.10 (Precious Metals)
§ 105-278.8
(Charitable Hospital)
§ 105.277.11 (TIF)
§ 105.277.12 (Antique Airplanes)
§ 105.277.13 (Brownfields)
§105-278.6A* (Retirement Facility)
Applications
No Application Required - § 105-282.1(a)(1)
a. § 105-278.1 or § 105-278.2
b. § 105-275 15, 16, 26, 31, 32a, 33, 34, 37, 40, 42, 44
c. § 105-277(g) or § 105-277.9
Single Applications § 105-282.1(2)
a. § 105-278.3, .4, .5, .6, .7, .8
b. 105-275 3, 7, 8, 12, 17, 18, 19, 20, 21, 31e,
35, 36, 38, 39, 40, 45 or § 131A-21
c. § 105-277(h), § 105-277.10, .13, .14, .15, .17 or §
105-278
d. § 105-277.8
No Application Required
§ 105-278.1. Exemption of real and personal property owned by units of government.
§ 105-278.2. Burial property.
§ 105-275. Property classified and excluded from the tax base.
(15) (16) (26) (31) (32a) (33) (34) (37) (40 (42 (44)
§ 105-277(g). Property classified for taxation at reduced rates; certain deductions.
§ 105-277.9. Taxation of property inside certain roadway corridors.
Single Application Required
§ 105-278.3. Real and personal property used for religious purposes.
§ 105-278.4. Real and personal property used for educational purposes.
§ 105-278.5. Real and personal property of religious educational assemblies used for
religious and educational purposes.
§ 105-278.6. Real and personal property used for charitable purposes.
§ 105-278.7. Real and personal property used for educational, scientific, literary, or
charitable purposes.
§ 105-278.8. Real and personal property used for charitable hospital purposes.
§ 105-275. Property classified and excluded from the tax base.
(3) (7) (8) (12)(18) (19) (20) (21) (31e) (35) (36)(3 (39) (41) (45)
§ 131A-21
§ 105-277(h). Property classified for taxation at reduced rates; certain deductions.
§ 105-277.10. Taxation of precious metals used or held for use directly in manufacturing or
processing by a manufacturer.
§ 105-277.14. Taxation of working waterfront property.
§ 105-277.13. Taxation of improvements on brownfields.
§ 105-277.15. (Effective for taxes imposed for taxable years beginning on or after July 1, 2010)
Taxation of wildlife conservation land.
§ 105-277.17. (Effective for taxes imposed for taxable years beginning on or after July 1, 2010)
Taxation of community land trust property.
§ 105-278. Historic properties.
§ 105-277.8. Taxation of property of nonprofit homeowners' association.
§ 105-275 - Exclusions
See Attachments
Quick Look – attached exhibit
Actual Language – attached exhibit
Legal Framework
• Assessor Duties
– Approve & Appeal - § 105-282.1(b)
• Upon Receipt of (initial) Timely Filed Application –
Approve or Deny
– Approve (Use of Property) – if approved all relevant taxing
units should be notified
» Articles of Incorporation, I/E statements, certification
from other agencies, local resolution…
– Deny – Owner must be notified and provided appeal rights to
County Board of Equalization and Review
» If Board Denies – Notification and Appeal Rights to NC
PTC
Legal Framework
– Approve & Appeal - § 105-282.1(b)
• Upon Receipt of Late Filed (initial) Application –
Approve or Deny
– May be granted upon showing of good cause
» Important to remain logical, consistent & fair
Legal Framework
• Assessors Duties
– Review & Audit - § 105-282.1(e)
• Assessor must review and Verify at least 1/8 of parcels
in county exempted or excluded from taxation pursuant
to §105-296(l)
– Assessor may deny – taxpayer may appeal BOE
– Assessor may require property owner to make available for
inspection information
» Taxpayer 60 days to submit information or risk status
Legal Framework
• Assessors Duties
– Discover & Report
• Discover - § 105-282.1(c)
– Owner that may be eligible but neither lists nor files
application is subject to Discovery, however owner can
establish status through appeal and approval
• Create Property Roster - § 105-282.1(d)
– Assessor prepares and maintains list and reports to DOR
»
»
»
»
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Name
Description of property
Use
Value
Muni breakdown
Timing
• Jan – Listing Period - new apps;
annual review – run audit reports
• Feb – Annual review requests (30
days)
• March – Review; send decision
letters (appeal rights); 2nd 30 day
request
• April – BOE hearings
• May – Continued review in
necessary
• June - Continued review if
necessary
• July - Continued review if
necessary
• August - Continued review if
necessary
• Sept - Continued review if
necessary
• Oct – All decisions should be out
start DOR report
• Nov – Submit report to DOR
• Dec – Scrubbing Data; prepping to
run Jan audit reports in
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty
– Approve & Appeal
– Review & Audit
– Discover & Report
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty
– Approve & Appeal
Initial Review
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty
– Review & Audit
Computer Generated Plan – Audit Reports – Feed AV 50
» Last date audited & when is next one scheduled
•
•
•
•
Year 2001 – churches, educational, charitable, religious, elderly, disabled, and
veterans.
Year 2006 – churches, educational, charitable, religious and other properties.
Year 2008 – elderly, disabled and veterans.
Year 2012 we will begin to deal with any exemptions scheduled as apart of year to
be audited which will include churches, educational, religious, elderly, and others.
Query of system data
identifies all parcels of
this type scheduled for
re-qualification in 2012.
Exemption type is identified by
code which corresponds to line
category on NCDOR form AV-50.
Account is identified for requalification based on combination of Type of Audit and Year Next Audit. All parcels coded a
re-qualified in the year 2012. Once the property has successfully re-qualified Year Next Audit field is updated.
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty – Review & Audit
– Cover Letters & Questionnaires
– What to do with non-compliance
– Outside Sources and Relationships to Assist with Reviews
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty – Review & Audit
– Cover Letters & Questionnaires
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty – Review & Audit
– What to do with non-compliance
» Churches
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty – Review & Audit
– Outside Sources and Relationships to Assist with Reviews
» IRS - www.irs.gov/charities/article/0,,id=240099,00.html
» Secretary of State – www.secstate.state.nc.us
» Physically Inspect
» Chamber of Commerce
» Zoning & Planning
» Cities
» Social Services
Case Study – Durham County
Compliance Review for Property Tax Programs in Durham
• Assessor’s Duty
– Discover & Report
» AV50
2011 Legislation
• G.S. 105-275. — Property classified and excluded from the tax base:
Exempts any real and personal property that meets each of the following requirements:
a. It is a contiguous tract of land previously (i) used primarily for commercial or industrial
purposes and (ii) damaged significantly as a result of a fire or explosion.
b. It was donated to a nonprofit corporation formed under the provisions of Chapter 55A of the
General Statutes by an entity other than an affiliate, as defined in G.S. 105-163.010.
c. No portion is or has been leased or sold by the nonprofit corporation.
• G.S 105-275(12) — Property classified and excluded from the tax base:
Modifies when land used for conservation purposes is to be excluded from property taxes.
Amends 105-275(12) by providing that real property that (i) is owned by a nonprofit
corporation or association organized to receive and administer lands for conservation
purposes, (ii) is exclusively held and used for one or more of the purposes listed in this
subdivision, and (iii) produces no income or produces income that is incidental to and not
inconsistent with the purpose or purposes for which the land is held and used and if a
disqualifying event occurs, provides for the collection of five years of deferred taxes under
G.S. 105-277.1F(a).
2011 Legislation
• G.S. 105-278.6. — Real and personal property used for charitable purposes:
Extends the time period for holding real property as a future site for housing for low
or moderate income individuals and families from five years to 10 years. The
deferred taxes would be due after 10 years if the property was not used for the
intended purpose. This change goes into effect for the 2011 tax year so any
property which would have lost its exclusion due to the 5 year time limit now has 5
more years to put the property into use.
(Effective July 1, 2011; HB 417, s. 1, S.L. 2011-368)
• G.S. 105-277.9A. — Taxation of property inside certain roadway corridors:
Reduces the property tax owed for improved property inside certain roadway
corridors. Adds the following provision which taxes improved real property located
within a roadway corridor at 50% of its appraised value. This law is repealed in July
of tax year 2021.
Best Practices/Lessons Learned
• Share
Questions
End