ese days, any discussion of the process of appraising land, homes, and other buildings for tax
purposes, particularly if the property is located at the coast, on a lake, in the mountains, or in the
fast-growing Triangle (in other words, pretty much anywhere in North Carolina) is likely to include
the term “sticker shock.” Unfortunately, such discussions also frequently include taxpayers’ expressions
of frustration with, confusion about, and mistrust of the assessment process. More than half of North
Carolina counties revalue land, homes, buildings, and other structures, defined as real property,
only once every eight years, and many taxpayers have limited knowledge of the laws and procedures
governing the valuation and assessment of this property for local government
1
taxation. Infrequent
revaluations in high-growth areas can result in individual valuations that double, triple, or even
quadruple from one revaluation to the next. In contrast, business personal property and motor vehicles
are assessed for taxation every year by North Carolina counties, and that process generally attracts
little notice—let alone sticker shock. e differences in taxpayer sentiment may be attributed to several
factors, among them the varying ways in which real and personal property are added to the tax rolls
(the former by the tax assessor and the latter generally by the taxpayer), the shorter cycle for revaluation
of personal property as compared to real property, and the depreciation of personal property over time
as contrasted with the typical appreciation of real property. Certainly the exclusion from taxation of
nonbusiness personal property (other than classified motor vehicles) plays a role since taxes on property
used to produce income are likely to be considered a cost of doing business rather than an unavoidable,
burdensome obligation imposed on a citizen’s home or land.
is bulletin explains the legal framework underlying the assessment of property by North
Carolina counties as well as the laws and procedures governing review and appeal of these assessments.
is bulletin may be of particular interest to local officials and citizens in the thirty-eight counties
in which new countywide real property valuations became effective January 1, 2008, or will become
effective January 1, 2009. For a list of these counties, see Table 1.
1. Real property includes land, buildings, and permanent fixtures, as well as rights and privileges pertaining to land,
such as mineral or forestry rights. Personal property includes all other property, both tangible and intangible, that is not
permanently affixed to land.
PROPERTY TAX BULLETIN NUMBER 144 | MARCH 2008
A Citizens’ Guide to the Revaluation
and Assessment of Property by
North Carolina Counties
by Shea Riggsbee Denning
2 UNC School of Government Property Tax Bulletin
Table 1. Counties with Revaluations of Real Property in 2008 and 2009
Effective
January 1, 2008
Cabarrus
Caswell
Cherokee
Cleveland
Durham
Jackson
Lincoln
Perquimans
Pitt
Richmond
Surry
Union
Vance
Wake
Wilson
Yancey
Effective
January 1, 2009
Alamance
Caldwell
Chatham
Davie
Duplin
Edgecombe
Forsyth
Gates
Harnett
Hyde
Lenoir
Martin
Mecklenburg
Mitchell
Nash
Orange
Person
Polk
Rockingham
Stanley
Stokes
Swain
Transylvania
Ty rrel l
Warren
Yadkin
The Role of the County Assessor
e county assessor appraises and assesses all property in the county in accordance with the
Machinery Act, Subchapter II of Chapter 105 of the North Carolina General Statutes. e assessor
creates an abstract or property record card for all real property in the county.
2
is process is referred
to as a “permanent listing system” and its implementation, which began in the 1990s, marked a
departure from traditional listing methodology in which the duty to list property subject to taxation
was borne by the owners of real and personal property. Even in a permanent listing system, however,
owners of real property remain responsible for listing buildings and other improvements valued at
more than $100 that have been acquired, begun, erected, damaged, or destroyed since the time of
2. N.C. G. S. § 105-303(b) (hereinafter G.S.).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 3
the last appraisal.
3
e listing abstract or property record card reflects the owner of record as of the
listing date, which generally is January 1.
4
e term “owner of record” denotes ownership as reflected
in a document of public record—that is, a deed, judgment, probated will, or other document reflecting
ownership filed in the official record maintained by the clerk of superior court or the register of deeds.
Unlike assessors in most other United States jurisdictions
5
county assessors in North Carolina
are appointed rather than elected. And unlike most county employees, tax assessors are appointed
by the county board of commissioners rather than by the county manager.
6
e term of office is two
years, beginning on July 1 of odd-numbered years.
7
An assessor who has completed a two-year term
and has been certified by the Department of Revenue may be reappointed for a four-year term, at the
discretion of the board. During his or her appointed term, an assessor is not an employee at will, whose
employment may be terminated at any time. Instead, an assessor may only be removed from office for
“good cause,”—that is, for a reason that affects the assessor’s performance of the duties of the office, is
substantial, and directly affects the public interest.
8
Before an assessor is removed from office for such
a reason, the board of commissioners must provide the assessor notice in writing of the reasons for the
impending dismissal and provide the assessor an opportunity to appear and be heard at a public session
of the board.
A person appointed as assessor must be at least twenty-one years old as of the date of employment
and have a high school diploma or certificate of equivalency or, alternatively, have five years
employment experience in a vocation reasonably related to the duties of a county assessor.
9
Within
two years of the date of appointment, an assessor must pass courses approved by the Department of
Revenue covering the following topics: (1) state law governing the listing, appraisal, and assessment of
property for taxation; (2) the theory and practice of estimating the fair market value of real property
for ad valorem tax purposes; (3) the theory and practice of estimating the fair market value of personal
property for ad valorem tax purposes; and (4) property tax assessment administration.
10
As a practical
matter, these requirements are satisfied by completing and passing the examination in the following
courses: (1) Property Tax Listing and Assessing in North Carolina, a course co-sponsored by the UNC
School of Government and the Department of Revenue; (2) Real Property Appraisal, International
Association of Assessing Officers (IAAO) Course 101; (3) Personal Property Appraisal, a Department
of Revenue course; and (4) Assessment Administration, IAAO Course 400. After completing and
passing these four courses and exams, the assessor must also pass a comprehensive examination in
3. G.S. 105-303(b)(2); G.S. 105-309(c)(3), (4).
4. G.S. 105-285. An exception applies to exempt real property transferred after January 1 but before July 1. is
property is listed in the name of the new owner of record.
5. Gary C. Cornia & Lawrence C. Walters, Full Disclosure: Controlling Property Tax Increases During Periods of
Increasing Housing Values, 59 N T J, No. 3, 2006, at 736.
6. See G.S. 153A-82 (providing that manager shall appoint all employees except those who are elected or whose
appointment is otherwise provided by law). e county tax collector, county attorney, county manager, and county clerk also
are appointed by the board of commissioners. See G.S. 105-349 (county tax collector); G.S. 153A-114 (county attorney);
G.S. 153A-81 (county manager); G.S. 153A-111 (county clerk).
7. Assessors must, on occasion, be appointed during even-numbered years if there is a vacancy in the office. Given
that the Machinery Act sets forth a reappointment schedule based upon odd-numbered-year reappointments, boards of
commissioners appointing assessors in even-numbered years should make these appointments effective through June 30 of
the next odd-numbered year. e board may then resume the Machinery Act schedule of appointments July 1 of the odd-
numbered year.
8. 63C A J, P O E, § 183 (2d ed. 2005).
9. G.S. 105-294(b).
10. G.S. 105-294(b)(3).
4 UNC School of Government Property Tax Bulletin
property tax administration given by the Department of Revenue. Until an assessor completes these
requirements, the assessor is deemed to serve in an “acting capacity.”
11
Once an assessor meets these
requirements, the assessor is certified by the Department of Revenue. An acting assessor who fails
to qualify for certification within two years of appointment may not be reappointed until all of
the certification requirements are met.
12
Once certified, an assessor must complete at least thirty
hours of instruction in the appraisal or assessment of property every two years to remain eligible for
reappointment.
Upon appointment, an assessor must take the oath constitutionally required of all persons
elected or appointed to office and also must promise not to allow his or her “actions as assessor to
be influenced by personal or political friendships or obligations.”
13
is additional oath requirement
emphasizes the necessity of impartiality on the part of the assessor.
e assessor cannot, of course, single-handedly fulfill the duties of the office. Accordingly, the
assessor is authorized “within budgeted appropriations” to “employ listers, appraisers, and clerical
assistants necessary to carry out the listing, appraisal, assessing, and billing functions required by
law.”
14
Each person employed by an assessor as a real property or personal property appraiser must,
during the first year of employment and every other year thereafter, attend a course of instruction in
the employee’s area of work.
15
In addition, at the end of the first year of employment, the appraiser
must pass a comprehensive examination in property tax administration conducted by the Department
of Revenue. e Department of Revenue has adopted regulations that permit waiver of the
comprehensive exam requirement if the appraiser completes and passes the examination in Property
Tax Listing and Assessing in North Carolina and the basic appraisal course for either real or personal
property, IAAO Course 101, or Personal Property Appraisal, depending upon the appraiser’s area
of specialty.
16
e department also may waive the examination requirement if the appraiser has been
designated a North Carolina Certified Appraiser by the North Carolina Association of Assessing
Officers (NCAAO) or a Certified Assessment Evaluator (CAE) by the IAAO.
17
County boards of commissioners also are authorized, upon recommendation of the assessor, to
appoint one or more assistant assessors.
18
Boards seldom exercise this authority. Boards also may,
and frequently do, employ appraisal firms, mapping firms, and other outside contractors to assist
appraisers in performing their duties. e most common situation in which such outside contractors
are employed is when a county revalues its real property. Any person employed by an appraisal
firm whose duties include the appraisal of property for the county must pass a comprehensive exam
administered by the Department of Revenue.
19
In hiring an appraisal firm, a board of commissioners
must give primary consideration to firms registered with the Department of Revenue.
11. G.S. 105-204(c).
12. G.S. 105-294(c).
13. G.S. 105-295.
14. G.S. 105-296(b).
15. Id.
16. N.C. D R, P T D, R T C
C A, C A, A F A N C (2006).
17. Id.
18. G.S. 105-297.
19. is exam differs from the comprehensive exam for county appraisers. If an appraiser for an appraisal firm
passes the School of Government and Department of Revenue Property Tax Listing and Assessing in North Carolina
course along with either IAAO 101, for real property appraisers, or the Department of Revenue’s business personal
property course, for personal property appraisers, the comprehensive exam requirement is waived. N.C. D
R, P T D, supra note 16.
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 5
Revaluation of Real Property
North Carolina counties must conduct a countywide revaluation of all real property within the county
at least every eight years.
20
Revaluation is a labor- and time-intensive process. e typical county
has about forty thousand parcels, all of which must be separately appraised. Many of these parcels
include buildings, structures, and fixtures that must be appraised along with land.
21
Counties must
accomplish this task for each parcel at a fraction of the cost of a single-property or “fee” appraisal. On
average, counties spend less than $20 per parcel in a revaluation.
22
About half of the state’s counties
have shortened the number of years between revaluations to periods ranging from four to seven years.
In addition, real property may be reappraised in a non-revaluation year if the value of the property has
changed for some reason other than an economic condition affecting the county in general, such as a
rezoning of the property.
23
Personal property, as noted above, is appraised for taxation every year based
on its value on January 1.
24
Valuation Standard
e uniform standard governing the county assessor’s appraisal of all property, real and personal, is that
property be appraised at its market value—that is, the price at which it would change hands between a
willing and financially able buyer and willing seller, neither being under any compulsion to buy or sell
and both having reasonable knowledge of all the uses to which the property is adapted and for which
it is capable of being used.
25
Property is, in turn, assessed for taxation based on its appraised value,
with the exception of agricultural, horticultural, or forestry property that qualifies for taxation based
upon its present-use value and public service company system property assessed by the Department of
Revenue based in part on the effective rates of taxation in a given county.
26
To accomplish the task of valuing tens of thousands of parcels as of the January 1 revaluation
date, a county must utilize the methodology of mass appraisal rather than the methodology
employed in single-property appraisals, which are commonly performed at the behest of financial
institutions.
27
Mass appraisal is the systematic appraisal of groups of properties, commonly referred to
as neighborhoods, as of the controlling date (January 1 of the year of reappraisal) using standardized
procedures and statistical testing.
28
A large urban city, for example, may stratify property among
thousands of neighborhoods for purposes of conducting a countywide revaluation.
29
In a mass appraisal
20. G.S. 105-286.
21. According to data maintained by the Department of Revenue, Property Tax Division, as of September 2007, the
mean number of parcels per county was 50,845 and the median was 37,250.
22. G.S. 153A-150 requires each county to report to the Department of Revenue the terms of the county’s eight year
reappraisal budget, which includes information on estimated costs per parcel. e average amount budgeted per parcel for
revaluation years 2008 and later is $18.46.
23. G.S. 105-287.
24. G.S. 105-285. e value of a registered motor vehicle is determined annually as of January 1 of the year the taxes
become due. G.S. 105-330.2. Taxes on registered motor vehicles are due the first day of the fourth month following the date
the registration expires. G.S. 105-330.4(a).
25. G.S. 105-283.
26. G.S. 105-284.
27. P A V C. 13, at 285 (IAAO, 2d ed. 1996).
28. P A V, supra note 27, at 285.
29. See, e.g., W C G, W’ Y P W T ABC W C’
P R P (2007) (stating that Wake County designated 4,200 appraisal neighborhoods in its 2008
revaluation).
6 UNC School of Government Property Tax Bulletin
system, the assessor must make valuation judgments about groups of properties rather than single
properties and “must be able to develop, support, and explain standardized adjustments in a valuation
model among use classes, construction types, neighborhoods, and other property groups.”
30
ere are three generally recognized methodologies for valuing property, commonly referred
to as “approaches to value”: the cost approach, the sales comparison approach, and the income
approach.
31
e cost approach estimates value as the sum of the depreciated improvement cost and
the value of the site, or land, as if vacant and available for development at its highest and best use.
32
e sales comparison approach, as its name indicates, compares the property being appraised with
similar properties that have recently sold.
33
is approach is most applicable when sufficient sales
data is available for similar properties. It is commonly used to appraise single-family residences
and land, but it also is an effective approach for valuing multi-family and commercial properties
where sufficient sales data for these types of properties is available.
34
e third approach, the income
approach, defines value as the present worth of future benefits arising from ownership of a property.
e income approach to value is based on the principle that something is worth what it will earn.
35
To value property under the income approach, the assessor must analyze the income stream in terms
of quantity, quality, and duration and apply an appropriate capitalization rate to convert the stream
to market value.
36
Stated in terms of an equation, value equals income divided by rate.
37
us, “the
capitalized value of a given income stream varies directly with the amount of income and inversely
with the capitalization rate” and even “[s]light variations in the capitalization rate can result in large
variations in value.”
38
Schedule of Values
e assessor’s first step in conducting a countywide revaluation is to prepare uniform schedules of
values, standards, and rules to be used in appraising real property at its true value and at its present-
use value.
39
ese schedules serve as the county’s mass appraisal model and are implemented by
means of a computer assisted mass appraisal system (CAMA). e schedules incorporate building
cost figures derived from national data that have been adjusted to reflect local costs, sales data based
upon qualifying arms-length sales of property grouped by appraisal neighborhood, and income and
expense formulas applicable to commercial property and derived from local and national sources.
e schedule of values, standards, and rules sets forth values per appropriate unit of measurement
for use in appraising land and buildings. For example, the value of a dwelling typically is based on
an established amount per square foot, while the value of land is based upon a set amount per square
foot, lot, acre, or homesite, depending upon the highest and best use of the land. e land value per
appropriate unit of measurement also will vary depending on the neighborhood in which the land is
situated. e schedule of values, standards, and rules also sets forth factors warranting adjustments
30. P A V, supra note 27, at 285.
31. Id. at 42.
32. Id. at 43–44.
33. Id. at 45.
34. Id.
35. In re Southern Ry., 313 N.C. 177, 328 S.E.2d 235 (1985).
36. P A V, supra note 27, at 46.
37. In re Southern Ry., 313 N.C. at 185, 328 S.E.2d at 241.
38. Id.
39. G.S. 105-317(c).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 7
in valuations for various types of property. For example, a schedule may provide for adjustments to
the base value of dwellings for square footage of an upper story, based upon grade of construction,
to account for depreciation, and to include the value of items such as fireplaces, finished basements,
and air conditioning. A county’s schedule also typically authorizes adjustments to land value based
on factors such as homesite size, excess acreage, road frontage, topography, zoning, the presence
of easements, and other factors. A schedule also typically prescribes ranges of characteristics and
corresponding percentage adjustments for recognized factors.
e schedules of values, standards, and rules must be reviewed and approved by the board of
county commissioners before January 1 of the year they are applied, though the assessor may collect
data needed to apply the schedules before they are adopted by the board.
40
e assessor must submit
the proposed schedules, standards, and rules to the board at least twenty-one days before the meeting
at which the board will consider the schedule.
41
On the same day the schedules are submitted to the
board, the assessor must file a copy of the proposed schedules in the assessor’s office to be available for
public inspection. Upon receipt of the schedules, the board of commissioners must publish a statement
in a newspaper with general circulation in the county stating that the schedules have been submitted
and are available for inspection.
42
e newspaper notice also must specify the time and place of the
public hearing regarding the proposed schedules.
43
e board must hold this public hearing at least
seven days before adopting the final schedules.
44
e true value and present-use value schedules may be
approved separately or simultaneously, in the board’s discretion.
45
When the board approves the final schedules of values, standards, and rules, it must issue an order
adopting the schedules.
46
Notice of the order must be published once a week for four consecutive weeks
in a newspaper with general circulation in the county, with the last publication taking place at least
seven days before the last day for challenging the validity of the schedule through an appeal to the
Property Tax Commission, the statewide board of equalization and review.
47
e published notice must
state that the schedules have been adopted and are open to examination in the office of the assessor
and that a property owner who asserts that the schedules are invalid may appeal to the Property Tax
Commission within thirty days of the first publication of the notice.
Notication of the Appraised Value of Real Property
Before the first meeting of the board of equalization and review, the assessor must provide written
notice of a change in the appraisal of real property to the taxpayer
48
—that is, the owner of the
property—at the owner’s last known address.
49
is notice must be provided for appraisal changes
40. Id.
41. G.S. 105-317(c)(1).
42. G.S. 105-317(c)(2).
43. Id.
44. Id.
45. G.S. 105-302(c).
46. G.S. 105-317(c)(3).
47. Id.
48. e term taxpayer is defined as “any person whose property is subject to ad valorem property taxation by any
county or municipality and any person who, under the terms of this Subchapter, has a duty to list property for taxation. For
purposes of collecting delinquent ad valorem taxes assessed on real property under G.S. 105-366 through G.S. 105-375,
‘taxpayer’ means the owner of record on the date the taxes become delinquent and any subsequent owner of record of the real
property if conveyed after that date.” G.S. 105-273(17).
49. G.S. 105-296(i).
8 UNC School of Government Property Tax Bulletin
applicable to real property in revaluation and nonrevaluation years. ough the Machinery Act does
not require it, most assessors provide an informal appeal process to afford taxpayers an opportunity
to inform the assessor of their objections to an appraisal or assessment or to the denial of a request for
exemption. If the assessor finds the taxpayer’s objection well-founded, the assessor may correct the
error in the property assessment before the board of equalization and review convenes.
Review of Appraisals and Assessments
Each county has a board of equalization and review responsible for reviewing tax lists and hearing
taxpayer appeals. e board of commissioners serves as the county board of equalization and
review unless it appoints by resolution a special board to carry out these duties.
50
Many boards of
commissioners find that appointing a separate board of equalization and review permits review
of county assessments by a more representative cross-section of the community. For instance, the
board of equalization and review might be made up of of private appraisers, real estate professionals,
and others with a particular expertise in the valuation of property. e appointment of a separate
board also shields the review process from political pressures. In a handful of counties, boards of
equalization and review were created and continue to operate pursuant to the provisions of a local act
enacted by the General Assembly.
51
e board of equalization and review must convene no earlier
than the first Monday in April and no later than the first Monday in May. While the Machinery Act
provides that the board, in a non-revaluation year, “shall complete its duties on or before the third
Monday following its first meeting unless . . . a longer period of time is necessary,” the Act is not
explicit about the shortest amount of time the board may meet.
52
In some counties, the board
convenes and adjourns the same day. e Machinery Act’s reference to meetings held “[f]rom the
time of [the board of E & R’s] first meeting until its adjournment”
53
appears to contemplate that
there will be more than one meeting. It bears noting that the very purpose of the board is to provide
taxpayers an opportunity for a meaningful hearing and review of the assessment of their property.
Convening and adjourning on the same day is not a practice designed to meet that objective. e
author’s interpretation of the statute, in light of its vague language and its underlying purpose, is that
the board must have at least two meetings, though a contrary interpretation certainly is plausible. In
revaluation years, the board must adjourn by December 1; in other years it must adjourn by July 1.
is adjournment signals the end of the appeal period for real property, but not the end of the board’s
work. e board may remain in session after adjournment to consider appeals filed before adjournment
and timely appeals from valuation changes made by the board itself, notice of which was mailed
fifteen days before the board’s adjournment.
54
A taxpayer may appeal to the board by submitting a
written request for a hearing or by personally appearing before the board at one of its sessions.
55
50. G.S. 105-322.
51. See, e.g., 1991 N.C. Sess. Laws ch. 871 (Durham County); 1989 N.C. Sess. Laws ch. 606 (Cumberland County);
1981 N.C. Sess. Laws ch. 509 (Mecklenburg County).
52. G. S. 105-322(e).
53. Id.
54. e board also may consider appeals relating to discovered property and certain other appeals not related to the
appraisal and revaluation of real property discussed here. G.S. 105-322.
55. Notice of the date, hours, place, and purpose of the board’s first meeting must be published at least three times in
a newspaper with general circulation in the county, with the first publication at least ten days before the first meeting. e
notice also must state the dates and hours of the board’s subsequent meetings and the date on which it expects to adjourn.
G.S. 105-322(f).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 9
Standing
Consideration of taxpayer appeals comprises the lion’s share of the work of all boards of equalization
and review, or “boards of E&R,” as they are commonly termed. Boards of E&R are required by
statute “to hear appeals from any taxpayer who owns or controls property taxable in the county with
respect to the listing or appraisal of the taxpayer’s property or the property of others.”
56
While the
statute is broadly written, the courts have determined that the legal doctrine of standing permits a
taxpayer to contest the valuation of property of others only when the appellant taxpayer is in some way
aggrieved by that valuation.
57
Given that “‘[t]he purpose of the statutory requirement that all property
be appraised at its true value in money is to assure, as far as practicable, a distribution of the burden
of taxation in proportion to the true values of the respective taxpayers’ property holdings,’” a taxpayer
is only aggrieved by the valuation of another’s property when that property has been undervalued or
underassessed by the county assessor, thereby resulting in the taxpayer bearing a disproportionately
greater share of the overall tax burden.
58
e overvaluation of another’s property, which would lessen
the tax burden borne by other property owners, including the taxpayer, is not a matter that aggrieves
the taxpayer and, as such, is not a matter that the taxpayer may appeal.
59
In In re Whiteside Estates,
60
a Jackson County taxpayer filed an appeal with the county board of
equalization and review challenging the classification of a 227-acre parcel owned by Whiteside Estates,
a family corporation, for taxation based on its present-use value as forestland. e board determined
that the property did not meet present-use value requirements and notified Whiteside of its right to a
hearing. At Whiteside’s request, the board conducted another hearing and again determined that the
property had been improperly classified as forestland qualifying for present-use-value taxation. e
board ordered the property assessed at its market value of $719,000 rather than its present-use value of
$102,800. Whiteside appealed to the Property Tax Commission, contending that the initial appeal to
56. G.S. 105-322(g)(2).
57. In re Whiteside Estates, 136 N.C. App. 360, 525 S.E.2d 196 (2000).
58. Id. (quoting In re King, 281 N.C. 533, 189 S.E.2d 158 (1972)).
59. See Brock v. Property Tax Comm’n, 290 N.C. 731, 228 S.E.2d 254 (1976). Brock and several unidentified property
owners appeared before the Jones County Board of Equalization and Review to request a 25 percent reduction in the
appraised values of all farm property in Jones County. When their request was denied, Brock and eleven other taxpayers
appealed to the Property Tax Commission. Brock later sought to have ninety-nine additional landowners added to the
complaint. e Property Tax Commission dismissed all of the appeals on the basis that the taxpayers sought to attack the
schedule of values rather than the appraised value of their own property and thus lacked standing to pursue the appeal. e
taxpayers appealed to Wake Superior Court, which was, at that time, the body to which Property Tax Commission appeals
were filed. e superior court affirmed the Property Tax Commission decision. e taxpayers then appealed to the Court
of Appeals, which also affirmed the Property Tax Commission’s decision, though one judge dissented from the opinion.
e taxpayers appealed to the North Carolina Supreme Court, which reversed the lower court’s decision, determining that
the initial complainants had challenged the appraisal of their property rather than the schedule of values and, as such, were
entitled to a full hearing on the merits before the Property Tax Commission. e Supreme Court held, however, that the
Property Tax Commission had properly dismissed the appeal as to the ninety-nine property owners who sought to join the
appeal in process. Noting that the Machinery Act permitted any property owner to appeal an order of the county board of
equalization and review to the Property Tax Commission, the court held that this statutory provision presupposed a ruling
by the county board adverse to the appellant taxpayer with respect to the listing or appraisal of his property or the property
of others, after a hearing requested by the taxpayer. Since the additional taxpayers had not requested a hearing before the
county board or filed a timely notice of appeal, the dismissal of the case was proper. e original eleven appellants argued
that even if the ninety-nine additional plaintiffs lacked standing, they could appeal the appraisal of this additional property
under the authority to appeal the appraisal of others’ property. e court rejected this argument on the basis that there had
been no showing that the original eleven appellants had been aggrieved by those appraisals.
60. 136 N.C. App. 360, 525 S.E.2d 196 (2000).
10 UNC School of Government Property Tax Bulletin
the county board should have been dismissed because the taxpayer who challenged the classification had
no standing to do so. e Property Tax Commission denied Whiteside’s motion to dismiss and heard
the merits of the case regarding the property’s present-use classification. e commission affirmed the
county board’s decision taxing the property at market value. Whiteside appealed to the court of appeals
on the basis that the appealing taxpayer, as a general taxpayer in Jackson County who did not own
property in the present-use program or that adjoined the Whiteside property, had no standing to appeal
the classification of the Whiteside property. e court of appeals rejected Whiteside’s contention. e
court reasoned that as the owner of property in Jackson County, the appellant taxpayer was aggrieved
by the reduction in assessed value of the Whiteside property (from market to present-use) that resulted
from the allegedly improper classification of the property as forestland. us, the court concluded
that the taxpayer had standing to appeal to the county board for a revaluation of the Whiteside
property. Upon consideration of the merits of the classification issue, the court affirmed the Property
Tax Commission’s determination that the property was not eligible for appraisal at present-use value.
Given that someone other than the property owner may appeal the undervaluation or exemption of
property, the property owner must be notified of the challenge to the value or assessment and provided an
opportunity to be heard in a new (or “de novo”) hearing in which none of the board’s previous judgments
are binding. is may require the board of E&R to conduct two hearings—an initial hearing to hear
the party bringing the appeal and a subsequent hearing in which the property owner may be heard.
When property in a county appreciates rapidly from one revaluation year to the next, towns
within the county sometimes join taxpayers’ refrain by objecting to increases in appraised value of
real property. In these cases towns or their representatives may attempt to appeal the valuation of all
property within the town limits on behalf of the town’s taxpayers. Given that no property owned by
the town is taxable, by virtue of the exemption granted in the state constitution for property owned
by municipalities [codified in North Carolina General Statutes § 105-278.1 (hereinafter G.S.)], towns
have no standing to appeal the valuation of their own property or the property of others. Likewise, an
individual property owner in the town lacks standing to challenge the valuation of all property within
the town on behalf of all of the owners of such property since, as previously noted, a taxpayer may only
contest the valuation of others’ property when the taxpayer is in some way aggrieved by that valuation.
61
Proceedings before the Board of Equalization and Review
e procedures generally followed by the board of equalization and review are relatively informal, at
least when compared to proceedings before the Property Tax Commission or courts of general justice.
Unlike the Property Tax Commission, whose deliberations as a quasi-judicial state agency are exempt
from the open meetings law,
62
county boards of E&R, as quasi-judicial local agencies, must hear
taxpayer appeals and deliberate in open session.
63
Boards of E&R have discretionary authority to examine any witnesses and documents and to place
witnesses under oath and may subpoena witnesses or documents on its own motion.
64
e board must
subpoena witnesses or documents if an appellant taxpayer so requests and there is a reasonable basis
for believing that the witnesses have or the documents contain information relevant to the decision of
the appeal.
61. Id.
62. G.S. 143-318.18(7).
63. See D M. L, O M L G N C: S
Q A, Question 140 at 32 (6th ed. 2002).
64. G.S. 105-322(g)(3)(b).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 11
e board may appoint committees composed of its own members or other persons to assist it in
making necessary investigations.
65
e board also may employ expert appraisers on its own motion or
upon the demand of the appealing taxpayer.
66
If experts are employed upon a taxpayer’s demand, the
board may require the taxpayer to reimburse the county for the expense if the expert’s appraisal does
not result in a material reduction of the value of the property by the local board or by the Property Tax
Commission upon appeal.
67
e county assessor serves as clerk to the board of E&R.
68
e assessor must be present at all board
of E&R meetings and must maintain accurate minutes of the board’s actions.
69
In addition, the assessor
must provide the board with all information related to the listing and valuation of taxable property
in the county. At the hearing, the board of E&R may receive and consider evidence offered by the
taxpayer, the assessor, and other county officials.
70
As previously noted, the board may examine witnesses and documents, may place witnesses under
oath, and may subpoena documents on its own motion.
71
e board must subpoena witnesses and
documents upon request of the taxpayer if there is a reasonable basis for believing that the witnesses have,
or the documents contain, information relevant to the appeal.
72
e willful failure to appear, produce
documents, or testify when appearing in response to a subpoena is a Class 1 misdemeanor.
73
e board
must enter into its minutes any order reducing, increasing, or confirming an appraisal and must notify the
taxpayer by mail as to the action taken on an appeal no later than thirty days after the board adjourns.
74
All changes in listings, names, descriptions, appraisals, and assessments made by the board of
E&R must be noted in the tax records, which then must be totaled. A majority of the board of E&R
then must sign the following statement to be included at the end of the tax records:
State of North Carolina
County of __________________
We, the undersigned members of the Board of Equalization and Review of _______
County, hereby certify that these tax records constitute the fixed and permanent tax list
and assessment roll and record of taxes due for the yea r ____ , subject to only such
changes as may be allowed by law.
____________________
____________________
Members of the Board of Equalization and Review of County
65. G.S. 105-322(g)(3)(a).
66. Id.
67. Id.
68. G.S. 105-322(d).
69. Id.
70. G.S. 105-322(g)(2)(c). Ethical concerns may arise when persons other than attorneys seek to represent parties in
connection with an appeal to the board of E&R. is issue arises in the context of appeals filed by corporations as well as
individuals, particularly elderly individuals who may wish to have a younger relative explain or articulate the basis for the
appeal. e North Carolina State Bar issued an advisory opinion concluding that only lawyers may represent a party before a
planning board, board of adjustment, or other government body conducting quasi-judicial hearings since the representation
of another person at a quasi-judicial hearing constitutes the practice of law. N.C. State Bar, Formal Ethics Opinion 2007-3.
71. A subpoena issued by the board must be signed by the chair of the board, directed to the witness or to the person
having custody of the document, and served by an officer authorized to serve subpoenas. G.S. 105-322(g)(3)(b).
72. G.S. 105-322(g)(2)(c).
73. G.S. 105-322(g)(3)(b).
74. G.S. 105-322(g)(3)(d).
12 UNC School of Government Property Tax Bulletin
Post-Adjournment Changes
After the board of E&R certifies the fixed and permanent tax list and assessment roll and record,
the board of county commissioners has sole authority to authorize changes to the abstracts and tax
records.
75
A board of county commissioners may authorize changes for several purposes, two of which
are relevant to the discussion here: (1) to correct appraisals, assessments and tax amounts resulting
from clerical or mathematical errors and (2) to appraise or reappraise property when the assessor
reports that since adjournment of the board of E&R, certain circumstances warrant changing the
appraisal of property in the current calendar year.
76
e board of commissioners may delegate to the
assessor the authority to make changes for the first purpose, but only the board of commissioners
may make changes for the second purpose; moreover, the board may only make such a change if the
change could have been made by the board of E&R had the same facts been brought to its attention.
e board of county commissioners may not appraise or reappraise property to account for changes
that have occurred since the listing date. If a reappraisal demonstrates that property was listed at a
substantial understatement in value, quantity, or other measurement, the provisions of G.S. 105-312
providing for a discovery of property listed at a substantial understatement in value apply. To discover
property means to determine that it has not been timely listed, that a taxpayer made a substantial
understatement of listed property, or that the property was granted an exemption or exclusion for
which it did not qualify.
77
e taxpayer must be provided written notice of any appraisal or reappraisal that will adversely
affect the taxpayer’s interests and must be afforded an opportunity to be heard before any such
appraisal becomes final. Orders of the board of county commissioners and actions of the assessor on
delegation of the board’s authority
78
may be appealed to the Property Tax Commission.
Appeals from the Board of Equalization and Review to the Property Tax Commission
A county board of commissioners may by resolution permit a taxpayer to appeal a decision of a
separate board of E&R to the board of commissioners.
79
If the board of commissioners also serves as
the board of E&R or if the board of commissioners elects not to provide this appeal route, a taxpayer
may appeal a decision of the board of E&R to the Property Tax Commission, which functions as the
state board of equalization and review.
80
Only a taxpayer may appeal a decision of the board of E&R.
If the board of E&R reduces the valuation of property or grants an exemption or exclusion upon
the taxpayer’s appeal, the county may not seek review of that determination by the Property Tax
Commission. A notice of appeal to the Property Tax Commission from an order of the county board
of commissioners or board of E&R must be filed with the commission within thirty days of the date
the county board mailed its notice of decision to the property owner.
81
e property owner must also
send a copy of the notice to the county assessor. e grounds for appeal must be stated in the notice.
82
A notice of appeal is considered filed on the date postmarked by the United States Postal Service or,
75. G.S. 105-325(a).
76. G.S. 105-325.
77. G.S. 105-273(6b).
78. See G.S. 105-325.
79. G.S. 105-322(a).
80. G.S. 105-290.
81. G.S. 105-290(e).
82. G.S. 105-290(f).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 13
if there is no such postmark, on the date received in the office of the Property Tax Commission.
83
A
property owner bears the burden of proving that the appeal is timely.
84
e Property Tax Commission consists of five members, three appointed by the Governor and
two appointed by the General Assembly.
85
Of the two appointments made by the General Assembly,
one is made upon the recommendation of the Speaker of the House of Representatives and the other is
made upon the recommendation of the President Pro Tempore of the Senate.
86
For all appointments to
the commission made after July 1, 2007, each member has a four year term. Formerly the term of the
commission member appointed upon recommendation of the Speaker of the House of Representatives
was two years, while other members served four year terms, two of which expired on June 30 of each
odd-numbered year. e Property Tax Commission is required to meet at least once in each quarter
and may hold special meetings at any time and place within the state at the call of the chair or upon the
written request of at least three members.
Joint owners of property may file separate appeals or may jointly appeal the listing, appraisal, or
assessment of property. In addition, a taxpayer may file a single appeal to contest the listing or valuation
of more than one item of personal property or more than one tract or parcel of real property.
87
Upon
receiving an appeal filed by a taxpayer, the Property Tax Commission must provide a hearing before
one or more representatives of the commission
88
(followed by a review of the representative’s findings
of fact and conclusions of law by the full commission) or, alternatively, before the full commission.
89
e commission sets the time and place for the hearing of an appeal and, at least ten days before the
hearing, must provide written notice of either type of hearing to the taxpayer and to the clerk of the
board of commissioners of the county from which the appeal arises. At the hearing the commission or
its representative(s) must hear evidence and affidavits offered by the appellant taxpayer and the county.
e commission must determine the weight and sufficiency of the evidence and the credibility of the
witnesses, draw inferences from facts, and analyze conflicting and circumstantial evidence.
90
e Property Tax Commission is not bound by findings and conclusions of the county board of
E&R; instead, the hearing before the commission is “de novo,” meaning that it is based solely on the
record before the commission. Nevertheless, the court of appeals held in MAO/Pines Assoc. Ltd. v.
New Hanover County Board of Equalization
91
that the Property Tax Commission is not required to
consider evidence of a factor affecting the value of a taxpayer’s property unless the taxpayer alerts the
county assessor of the factor within the tax year in question, alerts the board of E&R of the factor upon
appeal, or states the factor in the application for hearing to the Property Tax Commission. In other
words, a taxpayer may not withhold material information from the county assessor and the local board
of equalization and review with plans to present the information to the commission in an appeal from
the local decision. In MAO/Pines, the taxpayer learned of asbestos contamination before the board of
83. G.S. 105-290(g).
84. Id.; G.S. 105-290(g).
85. G.S. 105-288.
86. G.S. 105-290.
87. Id.
88. G.S. 105-290(b)(2)(a) (permitting the commission to authorize one or more members of the commission or
employees of the Department of Revenue to hear an appeal, make examinations and investigations, have made a record of
the evidence offered at the hearing, and make recommended findings of fact and conclusions of law).
89. G.S. 105-290(b)(2).
90. In re McElwee, 304 N.C. 68, 87, 283 S.E.2d 115, 126-27 (1981).
91. 116 N.C. App. 551, 449 S.E.2d 196 (1994).
14 UNC School of Government Property Tax Bulletin
E&R heard the valuation appeal. e taxpayer did not alert the board or the county assessor of
the presence of asbestos on the property and appealed the board’s decision affirming the county’s
appraisal to the Property Tax Commission on the basis that “‘excessive expenses and low rents’”
92
warranted a reduction in value. e taxpayer later moved to amend its petition to the commission to
introduce an appraisal that took into account the presence of asbestos on the property, though the
motion itself did not specifically refer to asbestos. e commission affirmed the county’s valuation,
declining to consider the asbestos contamination. e court of appeals affirmed the commission,
holding that company representatives’ statements to the county assessor regarding asbestos
contamination nearly sixteen months after the effective date of the appraisal and almost four months
after the end of the calendar year of the appraisal as well as the proffer to the commission regarding
asbestos contamination “came too late to qualify as proper and timely notification.”
93
e court
explained that the Machinery Act provides for appeal to a local board to “provide opportunity at the
local level to deal with taxpayer-presented information and to modify appraisals as such information
requires before any appeal need be heard by the Commission.”
94
e taxpayer must appear in person at the hearing or be represented by an attorney.
95
While
individuals may represent themselves before the commission, corporate taxpayers and counties must
be represented by an attorney.
96
e commission and its individual members as well as Department
of Revenue employees so authorized by the commission may subpoena witnesses and documents
upon a subpoena signed by the chairperson of the commission. Proceedings before the commission
are governed by the rules of evidence that apply in the courts of general justice.
97
e Property Tax
Commission must make findings of fact and conclusions of law and, based upon these findings and
conclusions, enter an order reducing, increasing, or confirming the valuation appealed or listing
or removing the property from the tax lists. A certified copy of the order must be delivered to the
appellant and to the clerk of the board of commissioners of the county from which the appeal was
taken, and the abstracts and tax records of the county must be corrected to reflect the commission’s
order.
98
When the Property Tax Commission reduces the valuation of property or removes the
property from the tax lists and, based on the commission’s order, the taxpayer is owed a refund, the
taxpayer is entitled to receive the overpayment with interest.
99
Overpayments bear interest at the
rate set pursuant to G.S. 105-241.1(i) from the date interest begins to accrue until a refund is paid.
100
Interest accrues from the later of the date the tax was paid or the date the tax would have been
considered delinquent.
101
us, an overpayment of a 2007 tax made on December 20, 2007, begins to
accrue interest on January 8, 2008, the date the tax would have been delinquent.
102
An overpayment
for a 2007 tax bill made on February 1, 2008, would, in contrast, bear interest from the date of
92. Id. at 552, 449 S.E.2d at 197.
93. Id. at 560, 449 S.E.2d at 202.
94. Id. at 558, 449 S.E.2d at 201.
95. 17 NCAC 11.0217.
96. 17 NCAC 11.0216.
97. 17 NCAC 11.0216.
98. G.S. 105-290(b)(3).
99. G.S. 105-290(b)(4).
100. Id.
101. Id.
102. Taxes are payable at par—that is, without interest—until January 5 of the fiscal year for which they are levied.
When the last day for a taxpayer to accomplish a particular act falls on a weekend or holiday, the taxpayer has until the
next business day to perform the required act. Because January 5, 2008, falls on a Saturday, taxpayers may pay at par the
next business day, Monday, January 7, 2008. us, interest does not accrue and 2007–8 taxes are not delinquent until
January 8, 2008.
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 15
payment, since payment was made after taxes became delinquent. A refund is considered paid on a
date determined by the governing body of the taxing unit that is no sooner than five days after a refund
check is mailed.
103
Standard Governing Review of Assessment
ere is a well-established presumption under North Carolina law that the county tax assessor has
acted in good faith and that the assessor’s assessments are correct.
104
Because of this presumption, a
taxpayer seeking to challenge an assessment must produce evidence that the assessment is erroneous.
105
Without this presumption of correctness, every taxpayer would have an unlimited ability to attack
the assessment of property. e administrative and fiscal burden imposed upon local governments in
a system permitting unbridled taxpayer challenges would be insurmountable.
106
To say, however, that
the county’s assessment is presumed correct does not imply that a taxpayer may never demonstrate
otherwise. A taxpayer may rebut the factual presumption that the county’s assessment is valid by
producing competent, material, and substantial evidence that tends to show that (1) the tax assessor
used an arbitrary or illegal method of valuation and (2) the assessment substantially exceeded the
true value in money of the property. In other words, the resulting value is more important than the
methodology used to establish the value. To prevail on appeal, the taxpayer must produce evidence
demonstrating that flawed methodology resulted in an assessment that substantially exceeded the
property’s true value in money. Once the taxpayer produces such evidence, the presumption of
correctness is rebutted. e taxing unit then must produce evidence and persuade the finder of fact that
its methods will produce true values.
107
In re Amp Inc.
e leading case on the standard of review of assessments is In re Amp Inc.
108
Although the case arose
from a taxpayer challenge to the assessment of personal property, the standards of review established
by the court also apply to appeals of the assessment of real property. Amp owned and operated a plant
in Greensboro where it manufactured electronic parts and components. Amp filed business property
abstracts with the Guilford County tax supervisor (the title held by a county assessor before 1987)
for 1964-68, which included values for its inventories.
109
In August 1969, the tax supervisor notified
Amp of a discovery resulting from Amp’s undervaluation of inventory from 1964 to 1968. us, the
tax supervisor advised Amp of his intent to increase the valuation of Amp’s inventories for those years.
Based on these adjustments to value made through the discovery process, additional taxes and penalties
were assessed against Amp. Amp appealed the discovery to the county board of commissioners,
which approved and confirmed the assessment. Both the tax assessor and the county board valued the
inventories based on the values reported on Amp’s state income tax returns. e assessor and board
103. G.S. 105-290(b)(4).
104. In re Amp, Inc. 287 N.C. 547, 215 S.E.2d 752 (1975).
105. Id.
106. Id.
107. In re Southern Ry. Co., 313 N.C. 177, 182, 328 S.E.2d 235, 239 (1985); In re IBM Credit Corp., ___
N.C. App. ___ , 650 S.E.2d 828 (2007), aff’d, No. 520A07, 2008 WL 616118 (N.C. S. Ct. March 7, 2008) (per curiam).
108. 287 N.C. 547, 215 S.E.2d 752 (1975).
109. Inventories are now excluded from taxation by G.S. 105-275(33).
16 UNC School of Government Property Tax Bulletin
subtracted inventories reported to Forsyth, Mecklenburg, and Wake counties (where other Amp
facilities were located) from the total value reported for income tax purposes, thereby attributing
the remaining value to Guilford County. Amp appealed to the State Board of Assessment (the
predecessor to today’s Property Tax Commission).
e manager from the Greensboro Amp plant testified that Amp manufactured connections for
the electronics industry, which were used to terminate wires contained in various types of electronic
equipment. Amp received at its Greensboro plant metals in strips which it then processed through
machines to make a specific type of electrical terminal. Substantial scrap material was generated
in this process. Amp sold this scrap material along with damaged raw material to the mills from
which it purchased raw materials. Amp’s tax manager testified that the book values recorded by Amp
exceeded the true cash values of its inventories because Amp could only sell in-process inventory for
scrap prices. Since Amp had no finished goods on hand as of January 1 of any of the listing years at
issue, Amp’s tax manager testified that all of his computations for those years included in-process and
raw material inventories, all of which were valued as scrap. e tax manager testified that if Amp
had finished goods as of January 1, 1968, the book value of such goods would have equaled their true
value. Indeed, the values testified to by Amp’s tax manager before the State Board of Assessment
were lower even than the values listed by Amp for the years in question. Amp explained that its
outside accountant had improperly overvalued its inventory for the years in question.
e Guilford County tax supervisor (now, the tax assessor) testified that he believed the values
of inventory listed with the county should match the taxpayer’s books as well as the values reported
on a taxpayer’s state income and franchise tax returns. e tax supervisor testified unequivocally as
to his “assumption” that there was no difference between the amount to be reported as ad valorem
tax value and the amount reported on state corporate income and franchise tax returns, though he
conceded he had made no inquiry to determine the correctness of this view.
110
e State Board of
Assessment determined that the value of Amp’s inventories for property tax purposes was represented
by the values reported in its books for the years in question. e difference between book value and
the value reported by Amp thus constituted unlisted property subject to discovery and assessment
of additional taxes and penalties. Amp appealed the State Board of Assessment’s decision to the
Superior Court Division of Guilford County,
111
which reversed the State Board’s determination,
finding that (1) Amp in good faith listed its inventory at what it believed to be its true cash value;
(2) Amp produced competent, material evidence to justify its method of valuation, and there was no
competent, material evidence that Amp’s valuations were understated; and (3) the evidence before
the State Board contradicted the board’s findings that Amp’s inventory figures for income and
franchise tax purposes (that is, book value) equaled the “true cash value” of the inventory for property
tax purposes. e superior court thus determined that the State Board erred in concluding that the
valuation of inventory was to be determined by inventory records maintained for income tax purposes
(in other words, book value). e superior court ruled, therefore, that the difference between the
values included in Amp’s books and the values listed by Amp on property tax abstracts was not the
proper subject of a discovery. Guilford County appealed the superior court’s decision to the court of
appeals, which reversed the superior court. Amp then appealed to the state supreme court.
110. In re Amp, 287 N.C. at 564, 215 S.E.2d at 762-63.
111. Decisions of the Property Tax Commission are now appealed directly to the Court of Appeals rather than to
Wake County Superior Court.
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 17
e supreme court began its analysis by reciting the appropriate standard of review for decisions
by the State Board of Assessment and noting that “no court of the General Courts of Justice could
weigh the evidence presented to the State Board and substitute its evaluation of the evidence for that
of the Board.”
112
e court then recognized the factual presumption that property tax assessments are
presumed to be correct and held that in order to rebut the presumption, the taxpayer had to produce
competent, material, and substantial evidence tending to show that the county tax assessor used an
arbitrary or illegal method of valuation and that the assessment substantially exceeded the true value in
money of the property.
e court noted that the record demonstrated that the tax supervisor had used an illegal method
of valuation given his erroneous assumption that the true value of property equaled its book value.
e court then addressed the question of whether Amp produced competent, material, and substantial
evidence demonstrating that Guilford County’s assessment increasing the value of its inventories from
1964 to 1968 was substantially greater than the true value in money of the property.
e court noted that Amp’s tax manager testified that Amp hired an outside accounting firm to
prepare its abstracts for the years in question because it did not know how to compute the true cash
value of its inventories. Moreover, Amp’s tax manager testified that when Amp figured out how to
compute the value of its inventory, it concluded that the calculations of the outside accounting firm
were incorrect. us, the court concluded, there was no evidence to substantiate the values reported
by Amp from 1964 through 1968. e court further determined that Amp’s subsequently calculated
values were unreasonable, since Amp valued all of its material as scrap. e court rejected Amp’s
interpretation that its property was to be valued as if the company had to sell all of its inventory on
January 1 of each year, whether such material was raw or in process, so that the only potential buyers
would be scrap mills. e court noted that property was to be valued at its true value in money rather
than its value in a forced sale.
e court then analyzed the three types of property other than finished goods that constituted
Amp’s inventories: (1) scrap metal and damaged raw material, (2) nondefective in-process inventory,
and (3) nondamaged raw material inventory. ough the court concluded that the true value of scrap
metal and damaged raw material did equal the scrap prices paid by the supplying mills to repurchase
such material rather than the book value, it determined that AMP failed to prove that its inventories on
the relevant dates included scrap metals. us, the court reasoned that Amp’s proof that such property
was properly valued at scrap prices was of no consequence. As for the second category—nondefective
in-process inventory—the court pointed to the obvious fact that no ongoing business entity would sell
its in-process inventory for scrap prices. Amp’s assertion that it could only realize scrap value from
the sale of such uncompleted items failed to recognize the assumption that the entity was ongoing,
thereby contradicting the purpose of the statutory requirement that all property be valued at its true
value in money. Because the evidence Amp presented was based upon the theory that all of its in-
process inventory had to be valued as scrap, the court concluded that the company failed to produce
the evidence necessary to show that the assessment substantially exceeded the true value in money
of the property. e court noted that the mere fact that there was no market for particular property
did not deprive it of market value, which could be established by reference to factors other than sales.
e proper standard for valuing such property, according to the court, was replacement cost plus labor
and overhead. e court likewise rejected scrap pricing for items in the final category, nondamaged
112. In re Amp, 287 N.C. at 562, 215 S.E.2d at 761.
18 UNC School of Government Property Tax Bulletin
raw material inventory, noting that Amp’s methodology required it to assume that such property
lost about 60 percent of its value upon entering Amp’s warehouse. As with nondefective in-process
inventory, the court concluded that the appropriate formula for valuing raw material inventory was
replacement cost.
e court then considered whether the Machinery Act permitted a county assessor, as a per se
rule, to equate the book value of property as listed on a state income tax return with the true value in
money of such property for purposes of property taxation. e court concluded that such a rule was
not statutorily sanctioned. Nevertheless, the court noted that book value was the appropriate measure
of value for certain property such as business inventories and that the resulting values were more
important than the method used to determine valuation. e book values used by Guilford County
were based on figures Amp itself furnished to the state for income and franchise tax purposes. Amp
defined book value as the lower of cost or market; thus, by its own definition, the reported values
adopted by the county did not exceed market value. Moreover, the expert accountant testifying for
Amp before the State Board explained that Amp based book value on replacement cost plus labor and
overhead. us, the court agreed with the State Board’s conclusion that, in this case, book value was
evidence of the property’s true value in money and concluded that the differences between the values
originally listed by Amp and book value was subject to discovery.
Two-part test for challenging assessment
A North Carolina Court of Appeals decision involving the assessment of property in a country club
community in Davie County further demonstrates why proof of an improper appraisal methodology
alone will not satisfy a taxpayer’s burden on appeal.
113
Persons who purchased property in several
subdivisions in Davie County were required by the terms of restrictive covenants encumbering
their properties to join the Bermuda Run Country Club. e covenants provided that country club
membership was not a personal right “‘but shall run with the ownership of a Dwelling Unit.’”
114
e
initiation fee for the country club was due at the time title to an encumbered parcel of property was
transferred. e purchaser received a credit toward the total initiation fee in the amount of the fee in
effect at the time the previous owner acquired the property. e new purchaser was then obligated
to pay the difference, if any, between the previous and current initiation fees. e Davie County tax
assessor included $10,000 in the appraised value of each parcel of residential real estate to represent
the initiation fee as of the date of the county’s last revaluation. Several property owners objected to
the inclusion of this amount and appealed the valuations to the county board of E&R and then to the
Property Tax Commission, both of which affirmed the county’s assessments. e property owners
then appealed to the court of appeals, arguing that the county improperly included the values of the
country club memberships in the assessment of their property given that the memberships were
intangible personal property not subject to taxation. e court never addressed this issue; instead it
concluded as a preliminary matter that the appellants failed to produce any evidence that the county’s
assessments exceeded the true value in money of the properties. e property owners conceded in
their written brief to the court of appeals that, while they objected to the inclusion of the initiation
fees in the valuation of their properties, they were “‘not otherwise contesting the appraised value
of their real property.’”
115
e taxpayers’ attorney affirmed at the hearing before the Property Tax
113. In re Bermuda Run Property Owners, 145 N.C. App. 672, 551 S.E.2d 541 (2001).
114. Id. at 673, 551 S.E.2d at 542.
115. Id. at 677; 551 S.E.2d at 545.
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 19
Commission that he planned to present no evidence as to the value of the specific properties. e
attorney explained that since he was representing more than eighty taxpayers, the presentation of such
valuation evidence was “‘just not practical.’”
116
Based on the lack of evidence that the specific properties
had been substantially overvalued by the tax assessor, the court held that the taxpayers failed to carry
their burden to demonstrate that the assessments were invalid. us, the court affirmed the order of the
Property Tax Commission upholding the county’s assessments.
Immaterial Irregularities
Akin to the principle that taxpayers may not invalidate a county’s assessment merely by attacking the
methodology of assessment—without showing a corresponding unwarranted increase in value—is the
notion that an assessment will not be invalidated because of a procedural irregularity in the assessment
process. e Machinery Act provides that such “immaterial irregularities,” which range from clerical
errors by the assessor to failure to advertise, list, appraise, or assess any property for taxation, do not
invalidate the tax imposed on any property.
117
Property “not properly listed” during the regular listing period, property listed at a substantial
understatement in value, and property granted an exemption or exclusion for which it did not qualify
are subject to discovery under G.S. 105-312, which permits the property to be taxed for the current
and five previous years. Sometimes, however, property may escape assessment and taxation without
meeting any of these criteria. For instance, a taxpayer may properly list property, but the assessor
may inadvertently neglect to assess such property. A question then arises as to whether the omitted
assessment and resulting taxes may be imposed at a later date under the theory that the failure to timely
assess the property was an immaterial irregularity.
e North Carolina Court of Appeals addressed such a situation in In re Notice of Attachment and
Garnishment Issued by Catawba County Tax Collector Against Nuzum-Cross Chevrolet Inc.
118
Nuzum-
Cross Chevrolet timely listed its business personal property with the Catawba County tax supervisor
(now, the tax assessor) in 1976, 1977, and 1978. e tax department transposed numbers when
calculating the total assessment. As a result, Nuzum-Cross Chevrolet was taxed on a lower figure
than it should have been in 1976, 1977, and 1978. e county tax supervisor discovered the error in
September 1978 and billed Nuzum-Cross for the unpaid taxes. When Nuzum-Cross did not pay, the
tax collector attached one of the company’s bank accounts for $5,087.67, the amount of the additional
taxes plus interest.
At a hearing a district court judge ordered the bank to remit the total taxes due, minus penalties
and interest. e taxpayer appealed to the court of appeals. e appellate court held that the tax
supervisor’s error was an immaterial irregularity under G.S. 105-394 that did not invalidate the tax
imposed. Recognizing that its holding permitted the county to “go back two years (from 1978 to 1976)
to correct its error,” the court noted that under the Machinery Act “all property is subject to taxation
unless subject to an exemption.”
119
e appellate court acknowledged the taxpayer’s argument that a
taxpayer who intentionally fails to list property might be better off than one whose property is not
assessed due to an immaterial irregularity since discoveries cannot go back more than five years, while
116. Id.
117. G.S. 105-394.
118. 59 N.C. App. 332, 296 S.E.2d 499 (1982).
119. Id. at 334; 296 S.E.2d at 501.
20 UNC School of Government Property Tax Bulletin
the immaterial irregularities clause contains no such time limitation. But the court noted that it
was the role of the legislature, not the court, to impose these time limits. us the court of appeals
affirmed the district court’s order, which, as previously mentioned, did not award interest or penalties.
Another case significant for its role in setting parameters for application of the immaterial
irregularities clause is In re Dickey, which involved an appeal from a Forsyth County assessment.
120
e Dickeys purchased a new home in Forsyth County in October 1988 for $272,500. In January
1989 the Dickeys submitted a listing form on which they listed their house on a portion of the form
separated by a perforation. When tax office personnel received the form, someone threw away the
perforated portion, which was the proper procedure if nothing was listed on that portion of the form.
at, of course, was not the case on the Dickeys’ form. e Dickeys received a 1989 tax bill imposing
taxes only on the value of their unimproved lot, $37,500. In June 1990 the assessor’s office realized
its mistake and discovered $185,500 in value. e assessor then billed the Dickeys for an additional
$2,094.30 in taxes. e Dickeys alleged that the assessment was untimely and appealed to the
county board of E&R, which dismissed their appeal. e Dickeys then appealed to the Property Tax
Commission, which concluded that the value of the Dickeys’ house was not discoverable pursuant
to G.S. 105-312, as the Dickeys had properly listed the house with the tax office. e commission
further concluded that the assessor had “appraised” the house at a value of $0 for 1989. While
the assessor could reappraise the house for 1990–91 and subsequent tax years,
121
the commission
concluded that this value was not retroactive. e commission ordered the assessor to revise its tax
records to reflect a value of $0 for the Dickey’s house in 1989. e county appealed the commission’s
decision to the court of appeals. While the court of appeals agreed with the commission that
discovery of property listed by the taxpayer was improper, the court disagreed with the commission’s
conclusion that the assessor had appraised the house at a value of $0 in 1989. e court cited the
lack of evidence that the assessor had attempted to determine the value of the Dickeys’ home before
1990 and noted that no one contended the home purchased by the Dickeys for more than $250,000
was actually worth nothing. Instead, the court noted that the record demonstrated the assessor was
unaware that the house existed because a portion of the Dickeys’ listing form was inadvertently
removed and destroyed. Because the assessor could not have appraised a house that he did not
know existed, the court determined that the provisions of G.S. 105-287 prohibiting retroactive
increases in appraised property values did not preclude the assessor from levying the challenged tax.
Furthermore, the court held that the administrative error that resulted in the failure to assess the
Dickeys’ house for 1989 taxes was an “immaterial irregularity,” within the meaning of G.S. 105-394.
e court concluded that such an irregularity did not invalidate the taxes owed by the Dickeys for
1989 and levied by the assessor in 1990 and reversed the decision of the Property Tax Commission.
e court further noted that G.S. 105-394 imposed no time restriction on the correction of
immaterial irregularities from previous years, noting that the imposition of time limits were the
exclusive province of the legislature.
e North Carolina Court of Appeals in In re Morgan
122
clarified that the immaterial
irregularities clause allows the tax assessor to correct clerical and administrative errors only—not
errors that result from an assessor’s failure to carry out assigned duties. Tyleta Morgan and her
husband owned property in Henderson County and in 1986 began to build a home on the property.
120. In re Dickey, 110 N.C. App. 823, 431 S.E.2d 203 (1993).
121. G.S. 105-287.
122. ___ N.C. App. ___, 652 S.E.2d 655 (2007).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 21
Construction of the house was not completed until 1993. Mr. Morgan, who died before the house was
assessed, obtained all required building permits from the county. e county inspected the home in 1986.
In 1993, when the house was 80 percent complete, Mr. Morgan listed the house with the Henderson
County tax assessor. e county performed a countywide reappraisal effective January 1, 1999, and
another effective January 1, 2003. An appraiser for the county visited the Morgan’s property during
both reappraisals, yet the Morgans’ house was not assessed. In 2004 the county assessed taxes on the
residence and informed Mrs. Morgan that she owed taxes and interest totaling $8,533.61 for tax years
1995 through 2003. e Property Tax Commission determined that the county should have assessed
the property before 2004 and that its failure to do so was not an immaterial irregularity. us, the
commission barred the county from attempting to collect the back taxes.
e Court of Appeals, in an opinion joined by two of three panel judges, reviewed the commission’s
decision under the “whole record test,” considering only whether the commission’s decision had a
rational basis in the evidence. Because legal issues are subject to de novo review in the court of appeals,
the court’s application of this deferential standard of review signaled its approval of the commission’s
view that only clerical and administrative errors may be corrected pursuant to G.S. 105-394. e
appellate court held that the commission’s conclusion was supported by substantial evidence that, for
more than a decade, the county botched multiple opportunities to assess the residence after it was
properly listed by Mr. Morgan. e court rejected the dissenting judge’s argument that G.S. 105-394
authorized the county to collect taxes for past years plus interest. e majority opined that even
if G.S. 105-394 permitted the levy of taxes for past years, the county could not recover interest in
addition to the taxes “when non-payment was due to the gross and repeated failures to assess by the
County Tax Assessor’s Office.”
123
Judge Geer dissented on the basis that “the Commission and majority opinion have improperly
imposed their view of appropriate public policy—fairness to individual taxpayers—to override other
public policies promoted by the statute’s plain language such as equality of taxation and reduction
of tax rates.” Noting that G.S. 105-394 defines “immaterial irregularity” as a “‘failure to assess any
property for taxation . . . within the time prescribed by law’” and does not explicitly require that this
failure result from a clerical or administrative error, the dissent concluded that the county’s failure to
assess Mrs. Morgan’s residence fell squarely within the statutory definition of immaterial irregularity.
Moreover, the dissent concluded that because interest automatically applies to taxes paid after the
date they became due, interest also applies to taxes assessed after their due date due to an immaterial
irregularity. e dissent cited public policy in support of its determination, namely the inequity of one
property owner being taxed on all of his or her property and another only being assessed on a portion
of her property due to a tax office error. e full assessment of all property, noted the dissent, permits
the tax rate to be set as low as possible.
e county appealed the court of appeals’ decision to the state supreme court, which has not yet
issued an opinion.
Settlement of Property Tax Appeals
Occasionally a taxpayer proposes to settle a matter appealed to the Property Tax Commission by
paying some portion of the tax owed before the case is heard by the commission. A taxpayer might,
for instance, offer to withdraw the appeal and pay the principal amount of taxes owed on the condition
123. Id. at ___, 652, S.E.2d at 657.
22 UNC School of Government Property Tax Bulletin
that the board commissioners waive accrued interest. In such a circumstance, a governing board
might wish to enter into the agreement and save the costs of litigation.
While normally a county board of commissioners has no authority to compromise interest or
any other portion of a tax absent a showing that the tax was imposed through clerical error, the tax
was illegal, or the tax was levied for an illegal purpose,
124
a board is implicitly empowered to settle
pending litigation.
125
Notwithstanding this power, a board of commissioners does not have unfettered
authority to enter into such settlements with respect to taxes that are the subject of an appeal to the
Property Tax Commission. If the board had unlimited discretion to settle appeals, the mere filing
of an appeal with the Property Tax Commission would provide the taxpayer and the board with a
convenient method to evade the Machinery Act’s prohibition against compromising taxes.
Given that a provision of state law prohibits a local governing body from compromising taxes
(including accrued interest), a board may not circumvent that prohibition through its power to settle
pending litigation.
126
Governing boards are, however, authorized to appraise or reappraise property
in the current calendar year upon the assessor’s report that, since adjournment of the board of E&R,
facts have come to the assessor’s attention that warrant raising or lowering the value of property.
127
If a governing board finds that reduction in the value of the property is authorized to comport with
the market value standard or other provisions of the Machinery Act, it is authorized to enter into a
settlement agreement that alters the property’s assessed value as provided by law.
A staff member of the Property Tax Division of the Department of Revenue reviews all appeals
filed with the Property Tax Commission.
128
is entails reviewing the issues on appeal with the
taxpayer, the counsel for the taxpayer, the county assessor, and the county attorney. ese discussions
sometimes result in an agreement about the appropriate valuation or exempt status of the property,
which may be formalized in a settlement agreement prepared as a consent order signed by the
director of the Property Tax Division of the Department of Revenue or as a formal order signed
by the chairperson of the Property Tax Commission. Such settlement agreements are afforded the
same status as a post-hearing decision by the commission; thus, the refund and release provisions of
G.S. 105-380 and G.S. 105-381 do not apply.
Tax receipts for assessments appealed to the Property Tax Commission are delivered to the
tax collector along with all other tax receipts, but the tax collector may not use enforced collection
remedies to collect such taxes nor advertise the taxes as delinquent until the appeal is resolved.
129
Appeal to the Court of Appeals from the Decision of the Property Tax Commission
Either the taxpayer or the county, or both, may appeal to the North Carolina Court of Appeals from
an adverse decision rendered by the Property Tax Commission.
130
A party seeking to appeal an order
124. G.S. 105-380; 105-381.
125. G.S. 153A-11 sets out the corporate powers of counties, which include the power to sue and be sued and to
contract and be contracted with. G.S. 153A-12 gives the board of commissioners authority to exercise the corporate
powers of the county. e authority to settle a claim is implicit in suing or being sued.
126. See, e.g., Cleveland County Ass’n for Gov’t by the People v. Cleveland County Bd. of Comm’rs, 142 F.3d 468
(D.C. Cir. 1998) (holding that a North Carolina county could not enter into a consent decree that circumvented state
elections law).
127. G.S. 105-325(a)(6).
128. N C D R, P T D, P T A M,
21 (2006).
129. An appeal is resolved when all rights to appeal are exhausted or the time for filing an appeal has expired.
130. G.S. 105-345.
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 23
of the Property Tax Commission must file with the commission a notice of appeal and exceptions
setting forth the basis on which the order is unlawful, unjust, unreasonable, or unwarranted and citing
errors alleged to have been committed by the commission. e notice of appeal must be filed within
thirty days after entry of the Property Tax Commission’s final order.
131
e Property Tax Commission
may then, upon its own motion or the motion of any party, set a hearing on the exceptions to the final
order on which the appeal is based. If the commission does not set such a hearing, the appeal proceeds
directly to the North Carolina Court of Appeals for hearing and determination. e appellant may
not rely on any grounds for relief on appeal that are not set forth in the notice of appeal filed with the
Property Tax Commission.
e appellate court considers questions of law under the standard of de novo review, pursuant to
which the court “consider[s] the matter anew and freely substitute[s] its own judgment for that of the
Commission.”
132
Other issues, such as sufficiency of the evidence to support the commission’s decision,
are reviewed under the “whole record test,” which requires the appellate court to determine whether
the commission’s decision has a rational basis in the evidence.
133
e whole record test does not permit
the reviewing court to replace its judgment for that of the Property Tax Commission where both
views are reasonable, regardless of whether the court justifiably could have reached a different result
had the matter been before it under the de novo standard. Instead, the whole record rule requires the
court, in determining the substantiality of the commission decision, to consider items in the record
that detract from the weight of the evidence supporting the commission’s decision below. Under the
whole evidence rule, the court must consider the evidence that justifies the commission’s decision along
with contradictory evidence.
134
By applying this analysis, a reviewing court can determine whether the
commission’s decision has a rational basis in the evidence.
135
e court of appeals bases its determination upon the record and proceedings of the Property Tax
Commission and may not receive additional evidence. If a party can demonstrate to the court that it
discovered evidence after the Property Tax Commission hearing that it could not through reasonable
efforts have obtained for use at the commission hearing and the evidence will materially affect the
merits of the case, the court of appeals may remand the record and proceedings to the Property Tax
Commission for consideration of the new evidence.
136
e court of appeals must review the record and exception and assignments of error in accordance
with the Rules of Appellate Procedure. e appellate court must decide all questions of law presented
by the appeal, interpret constitutional and statutory provisions, and determine the meaning and
applicability of the terms of any commission action.
137
e court may affirm, reverse, or declare null
and void the decision of the Property Tax Commission or may remand the case for further proceedings.
e appellate court may reverse or modify the Property Tax Commission’s decision regarding a
disputed assessment if it determines that the substantial rights of the appellants have been prejudiced
because the commission’s findings, inferences, conclusions, or decisions are (1) in violation of
constitutional provisions; (2) in excess of the commission’s jurisdiction or statutory authority; (3) made
131. Id.
132. In re Greens of Pine Glen, 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003) (internal quotations omitted).
133. Id.
134. In re McElwee, 304 N.C. 68, 87–88, 283 S.E.2d 115, 127 (1981).
135. In re Owens, 132 N.C. App. 281, 511 S.E.2d 319 (1999).
136. G.S. 105-345.1.
137. G.S. 105-345.2.
24 UNC School of Government Property Tax Bulletin
upon unlawful proceedings; (4) affected by other errors of law; (5) not supported by competent,
material, and substantial evidence in view of the entire record; or (6) arbitrary or capricious.
138
e taxpayer, the county, or both may appeal an adverse decision by the court of appeals to the
North Carolina Supreme Court if the case directly involves a substantial question arising under the
state or federal constitution (this might be the case, for example, if the issue involved an attempt
to tax property within the exclusive jurisdiction of the federal government) or in a case in which a
dissent is filed by a court of appeals judge.
139
In cases in which there is no appeal of right from the
court of appeals decision, a party may petition the supreme court for discretionary review after the
court of appeals renders its decision.
140
e supreme court may only agree to review the case if it
determines that the subject matter of the appeal has significant public interest, the case involves legal
principles of major significance to the jurisprudence of the state, or the court of appeals decision
conflicts with a supreme court decision.
141
A petition for appeal of right to or for discretionary review
by the state supreme court must be filed within fifteen days after the mandate of the court of appeals
has been issued to the Property Tax Commission.
142
e mandate of the court consists of certified
copies of its judgment and opinion, which are issued by the clerk of the court to the clerk of the
Property Tax Commission.
143
e clerk of court enters judgment and issues the mandate twenty days
after the written opinion of the court is filed with the clerk.
144
Recall that a tax collector may not seek to collect taxes or enforce a tax lien resulting from an
assessment appealed to the Property Tax Commission until the appeal is finally adjudicated.
145
ough various arguments could be raised regarding the time at which the appeal is “finally
adjudicated,”
146
the most conservative and prudent course of action for tax collectors is to refrain
from enforcing payment of taxes subject to an appeal until either the entry of an opinion by the
state supreme court or upon expiration of the time to file an appeal as of right or a petition for
discretionary review to either the state court of appeals or state supreme court.
Adjustment of Real Property Values in Nonrevaluation Years
As noted earlier, the Machinery Act provides for annual appraisal of personal property and octennial
appraisal of real property. Yet for the sake of equity and uniformity, some parcels of real property
must be reappraised in a year in which general revaluation of real property is not undertaken.
Property may be rezoned from residential to commercial, bringing about a change in its highest
and best use and the resulting valuation. Buildings may be constructed, improved, or expanded,
and portions of existing parcels may be transferred, which can result in a change in the portion of
property valued as residual acreage.
147
While most of the aforementioned changes increase the value
of property in a nonrevaluation year, property also must be reappraised for qualifying changes that
138. Id.
139. G.S. 7A-30.
140. G.S. 105-345.4.
141. G.S. 7A-31.
142. Rules 14, 15, Rules of Appellate Procedure.
143. Rule 32, Rules of Appellate Procedure.
144. Id.
145. G.S. 105-378(d).
146. N.C. R. Civ. P. 54.
147. See In re Corbett, 355 N.C. 181, 558 S.E.2d 82 (2002) (approving the reappraisal of residual acreage from a
larger parcel as a residential homesite after transfer of that acreage to a new owner in a nonrevaluation year).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 25
reduce its value, such as damage or destruction of property by tornados, floods, or fires. Property may
also be reappraised to correct errors in the initial appraisal, which can result in an increased or lowered
valuation, depending upon the circumstances. G.S. 105-287 directs the assessor in a nonrevaluation
year to reappraise specific parcels in order to correct clerical or mathematical errors in the former
appraisal; to correct appraisal errors resulting from misapplication of the county’s appraisal manual;
or to recognize an increase or a decrease in value resulting from some factor other than normal
depreciation, economic changes affecting property in general, or certain listed improvements such as
repainting and landscaping. If the circumstance that causes the increase or decrease in valuation is not
specifically excluded from reappraisal, the assessor is required to reappraise the property to recognize
the impact of that circumstance.
148
An appraisal change may only be made based on a factor that has affected the property by January 1
of the year in which the property is reappraised. us, if a county conducts a countywide reappraisal
effective January 1, 2007, and a house is destroyed by fire on January 2, 2008, the property may not be
reappraised until 2009.
Reappraisals made under the authority of G.S. 105-287 must conform to the appraisal manual
adopted in the last revaluation year so that they will represent the property’s market or present-use value
as of January 1 of the revaluation year rather than its current value. A fee appraiser’s independent
determination of value may only be relied upon to the extent that it correlates to the applicable schedule
of values.
149
us, in the example above in which a house is destroyed by fire on January 2, 2008,
the reappraisal of the affected parcel in 2009 will be based upon the 2007 schedule of values.
Nonrevaluation year appraisals take effect as of January 1 of the year in which they are made and do
not affect previous tax years.
Property may not be reappraised in a nonrevaluation year based on an increase or decrease in value
evidenced by a sale that occurs after the January 1 revaluation date.
150
While the transfer of some portion
of a larger parcel requires reappraisal to assign value to the resulting parcels, the sale of an entire parcel
does not, since such a sale is not a factor from which the increase or decrease in value results.
151
e county assessor must complete all reappraisals warranted under G.S. 105-287 before the board of
E&R convenes. Once the board is in session, reappraisal may only occur at its direction. Any reappraisal
by the board of E&R must conform to the standards and procedures set forth in G.S. 105-287. e
Property Tax Commission’s authority to change property valuations is limited to the same extent as the
assessor’s; thus any reappraisal ordered by the commission must likewise conform to G.S. 105-287.
152
After adjournment, the authority of the board of E&R is largely limited to considering appeals
filed before adjournment. At this stage in the assessment cycle, only the board of county commissioners
may make or authorize changes to the tax records, including reappraisal.
153
e board of county
commissioners may authorize the reappraisal of property when the assessor reports that, since the
adjournment of the board of E&R, facts have come to the assessor’s attention rendering it advisable to
raise or lower the appraisal of property in the current calendar year. e assessor has discretion over
whether to make such a report to the board.
148. Id. at 185, 558 S.E.2d at 84.
149. In re Allred, 351 N.C. 1, 10, 519 S.E.2d 52, 57 (1999).
150. In re Allred, 351 N.C. 1, 519 S.E.2d 52 (1999).
151. Compare In re Corbett, 355 N.C. 181, 558 S.E.2d 82 (nonrevaluation year reappraisal affirmed when parcel split
into two smaller buildable lots) with In re Allred, 351 N.C. 1, 519 S.E.2d 52 (holding that a sale after January 1 of the
revaluation year is not a factor from which an increase of decrease in value results within the meaning of G.S. 105-287(a)(3)).
152. In re Allred, 351 N.C. at 3; 519 S.E.2d at 53.
153. G.S. 105-325.
26 UNC School of Government Property Tax Bulletin
The Property Tax Calendar
Many citizens and local government officials are surprised to learn that property taxes are levied for a
fiscal year that begins on July 1 and concludes the following June 30. is confusion is likely caused by
several factors. First, North Carolina real estate attorneys routinely prorate taxes between buyers and
sellers in real estate closings on a calendar year basis. Second, the January 1 date of assessment and
the January 6 delinquency date the following year roughly follow a calendar year cycle. In addition,
property taxes levied for the 2008–9 year generally are referred to simply as “2008 taxes.”
154
Anyone
familiar with local government finance and budgeting will recognize, however, that property taxes,
which are the bread and butter of local government finance, could be levied on nothing other than a
fiscal year basis. After all, county commissioners and city council members adopt their budgets and
set the property tax rate by July 1 of each year.
155
Bills for property taxes, the payments for which
supply the revenue for budgeted expenditures, are mailed to taxpayers as soon as possible after July 1.
Taxes are due September 1 (a date that is widely ignored by taxpayers in all taxing jurisdictions
that do not offer a discount for early payment of taxes) and are payable without interest at any time
through the following January 5.
156
Most taxpayers, and all mortgage companies paying on behalf
of homeowners, pay property taxes before January 1 so that the amount paid may be deducted as an
itemized deduction from the property owner’s income tax return for the current calendar year. us,
midway through the fiscal year, the local government unit receives most of its revenues from current
fiscal year property taxes.
In order to estimate the probable revenues from property taxes levied at a given rate, the local
governing board must know the total assessed value of property subject to taxation in its jurisdiction
as well as the jurisdiction’s collection percentage in the current year. So that the board may determine
the assessed value, the Machinery Act requires that all appeals of the taxation or assessment of real
property (in years in which there is no countywide revaluation of real property) be filed by July 1—
the date by which the tax levy must be established.
157
In revaluation years, these appeals must be filed
no later than December 1.
158
Setting the Tax Rate
e tax rate is determined by dividing the budgeted revenue by the total value of assessed property—
in other words, the tax base.
159
If budgeted property tax revenue is B, total assessed value is V, and
the tax rate is R, this may be stated as the following formula: R = B / V. is is, of course, an overly
simplified formula given that no taxing unit collects 100 percent of the property taxes levied. us,
in setting the rate, the Budget and Fiscal Control Act prohibits the taxing unit from estimating a
percentage of collection of property taxes greater than the percentage collection for the preceding
154. is differs from the state treasurer’s convention of referring to fiscal years by the year in which they end. us
“2007 taxes” are levied for the 2008 fiscal year in the nomenclature of the state treasurer.
155. G.S. 159-13.
156. G.S. 105-360.
157. G.S. 105-322(e).
158. Id.
159. See, e.g., Nathan B. Anderson, Property Tax Limitations: An Interpretive Review, 59 N T J,
No. 3, 2006.
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 27
fiscal year.
160
e rate derived from the above calculation (R) must be divided by the appropriate
collection percentage to arrive at the actual tax rate, R
1
.
An example may help illustrate the manner in which this calculation is made. Suppose that the
total assessed value of all taxable property (V) in Carolina County for the 2008–9 fiscal year is $3
billion. Carolina County has budgeted revenues of $19.5 million (B) from property taxes. Applying
the simple formula stated above, R = B [$19,500,000] / V [$3,000,000,000], the tax rate (R) equals
.0065 per $1. Carolina County’s collection percentage for 2007–8 is 97 percent, and the county cannot
assume a higher rate of collection for 2008–9. If the county levies a tax at the rate of .0065, it must
presume that it will not receive B [$19,500,000], but instead will receive no more than 97 percent of
B, or no more than $18,915,000. If the tax rate is set at .0065, the county may experience a shortfall
of $585,000 (or more, if the collection rate falls below 97 percent). e collection percentage may be
factored into the tax rate calculation in one of two ways. First, B [$19,500,000] may be divided by the
collection percentage [.97], resulting in B
1
[$20,103,092.78]. e resulting formula is R
1
[.006701] = B
1
[$20,103,092.78] / V [$3,000,000,00]. e tax rate, rounded to the nearest ten thousandth, is .0067.
Multiplying R
1
[.0067] by V [$3,000,000,000] and multiplying the result by .97 results in budgeted
revenue B [$19,500,000]. Another way to reach the same result is to divide the rate R [.0065], resulting
from the simple formula, by the collection percentage rate, .97. e quotient is R
1
[.006701].
e tax rate stated in Carolina County’s budget will be $.67 or 67 cents, rather than .0067. is is
because, in North Carolina, property tax rates are stated in terms of dollars per hundred. us the
calculated rate of .0067 per dollar equals a rate of .67 per hundred dollars. A taxpayer in Carolina County
with property assessed at $100,000 in value will owe $670 in taxes at this rate. is figure may be derived
by multiplying $100,000 by .0067 or by dividing $100,000 by 100 and multiplying the result by .67.
161
Actual versus Effective Tax Rates
In its annual report on city and county management of cash and taxes, the North Carolina Department
of State Treasurer lists actual and effective tax rates for each city and county. Obviously, the actual tax
rate is the rate set by the governing body of a taxing unit for a particular year. Effective tax rates, in
contrast, illustrate the manner in which increases in property values lower the stated tax rate applicable
to a parcel of property.
For example, a tax rate of 50 cents applied to a tax base of $10 billion results in a tax levy of $50
million. If the market value of taxable property increases to $12 billion, but the assessed value remains
$10 billion, the effective tax rate is approximately 42 cents. is is because the taxing unit is imposing
$50 million in property taxes on a tax base of $12 billion. e property tax paid divided by the actual
market value of the property equals 42 cents—the effective tax rate. Because taxing units revalue
property on differing schedules and experience different levels of economic growth, the publication
of an effective tax rate facilitates comparison of the tax rate imposed by one governmental unit to that
imposed by other governmental units.
160. G.S. 159-13(6).
161. Some other states express property tax rates as mills per dollar. ere are 1,000 mills in a dollar (10 mills to a
penny). A decimal rate tax of .0067 would be expressed as 6.7 mills per $1 (.0067 / 1,000).
28 UNC School of Government Property Tax Bulletin
Revenue-Neutral Rate
A new term was introduced into the tax lexicon in 2005: the revenue-neutral tax rate. Unlike the
effective tax rate, which facilitates comparison of the tax rate set by different jurisdictions, the
revenue-neutral rate provides a comparison of the tax burden borne by property owners within
a particular taxing unit before and after revaluation. e revenue-neutral rate is the rate for the
fiscal year after revaluation that, taking into account expected rates of growth in the tax base and
excluding increases in market value recognized by the revaluation, would produce revenue that
equals the current year’s tax levy.
162
e expected rate of growth in the revaluation year is based upon
an average of increases or decreases to the assessed value since the last revaluation. is growth or
decline is based on additions to or reductions in a taxing unit’s base of taxable property rather than
on the increases and decreases in market value that are accounted for by the effective tax rate but
are not recouped by the taxing unit in nonrevaluation years. Changes to the real property tax base
in nonrevaluation years result from the construction of new homes and businesses, improvements
to existing structures, divisions and conveyances of land, rezoning, and other occurrences unrelated
to economic conditions affecting the taxing unit in general. Changes in the personal property base
occur each year because personal property is valued on an annual basis; moreover, personal property
generally depreciates, or decreases in value from one year to the next. G.S. 159-11(e) provides that the
growth factor used in calculating the revenue-neutral rate is based on the average increase in the tax
base “due to improvements since the last general reappraisal.”
163
Adoption of a revenue-neutral rate in the year of a revaluation will not, however, prevent taxes
assessed against real property from increasing.
164
is is because, in a revaluation year, a realignment
occurs in the tax burden imposed upon real and personal property. In a revaluation year, the assessed
value of real property equals its market value as of January 1 of that year. In each subsequent year,
the assessed value of real property (other than new construction) remains constant, though its
market value typically increases. Personal property, in contrast, is valued at its market value every
year. Because real property is assessed at less than its current market value in the years subsequent
to a revaluation and the assessed value of personal property equals its market value in those years,
personal property bears a greater portion of the overall tax burden in relation to its true value. at
imbalance is corrected in a revaluation year, when real property again shares equitably in the tax burden
imposed. is realignment almost always results in real property comprising a larger percentage of
the overall tax base in a revaluation year. us, even under a revenue-neutral rate, a larger portion of
revenue is generated from real property in a revaluation year than from personal property. As a result,
many individual real property owners receive increased tax bills in revaluation years.
A sample calculation may assist in illustrating this point. Assume that Carolina County has a
$3 billion tax base and a tax rate of $.70 in the 2006–7 fiscal year. Seventy-eight percent of this base
value ($2.34 billion) is derived from the assessed value of taxable real property; ten percent ($300
million) is derived from the valuation of personal property other than registered motor vehicles; ten
162. G.S. 159-11(e).
163. For a detailed discussion of the method for calculating a revenue-neutral tax rate, see Shea Riggsbee Denning
and William C. Rivenbark, Statement of Revenue-Neutral Tax Rate and Provision for Mid-Year Property Tax Rate Change,
L F B N. 32 (Chapel Hill: UNC School of Government, November 2004).
164. Forsyth County published an explanation of the impact of a revenue-neutral rate on real property taxes in
conjunction with its last revaluation. See Technical Discussion–Revenue Neutral Tax Rate, www.co.forsyth.nc.us/tax/
reval.pdf (last visited March 31, 2008).
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 29
percent ($300 million) is derived from the valuation of registered motor vehicles; and two percent
($60 million) is derived from the valuation of public service company system property.
e 2006–7 tax levy totals $21,000,000 ($3,000,000,000 x $.0070). Assume that 2007 is a
revaluation year and that the rate of growth in the tax base in each year since Carolina County’s last
revaluation averages 3 percent. If the tax base after revaluation increases by 15 percent, to $3.45 billion,
the revenue-neutral rate for 2007–8 will be $.63 cents.
165
Assuming that the value of all personal
property and public service company property increases by 3 percent in the revaluation year, real
property values as a percentage of the total tax base will increase from 78 to 80.3 percent. us, taxes
assessed on real property at the revenue-neutral tax rate will increase from $16.38 million in 2006–7 to
$17,367,949.57 in 2007–8. Taxes assessed on personal property, registered motor vehicles, and public
service company system property decrease from $4.62 million to $4,262,050.43. e impact on
individual tax assessments will depend on the rate at which the property has appreciated or depreciated.
165. is revenue-neutral rate is calculated by first determining the rate that must be imposed upon the revalued tax
base to produce revenues equal to those for the current fiscal year. e new tax base is $3.45 billion. e current year’s levy
is $21 million. us, a tax rate of $.61 per hundred would have to be imposed to produce revenues equaling those of the
current year [($3,450,000,000 / 100) / $21,000,000) = $.61]. is rate is then increased by three percent, the average annual
percentage increase in the tax base due to improvements since the last general reappraisal [$.61 * 1.03]. e resulting rate is
.6283, rounded to $.63. e resulting tax levy is $21,630,000.
30 UNC School of Government Property Tax Bulletin
ese calculations are set forth in Table 2.
Table 2. The Revenue-Neutral Tax Rate
Calculation of revenue-neutral tax rate 2006–7 2007–8
Tax base (dollars) 3,000,000,000 3,450,000,000
Overall growth in revaluation year (percent) 15
Increase in personal property value in revaluation year (percent) 3
Real property assessed value (dollars) 2,340,000,000 2,770,200,000
Personal property assessed value (dollars) 300,000,000 309,000,000
Registered motor vehicle assessed value (dollars) 300,000,000 309,000,000
Public service company system property (dollars) 60,000,000 61,800,000
Tax rate in 2006–7 0.70
Tax levy in 2006–7 (dollars) 21,000,000
Rate necessary to produce 2006–7 revenue in 2007–8 0.61
Average annual increase in tax base since last revaluation (percent) 3
Revenue neutral rate for 2007–8 0.63
Tax levy in revaluation year at revenue-neutral rate (dollars) 21,630,000
Change in personal property levy (percent) -7.75
Change in real property tax levy (percent) 6.03
Percent of tax base
Real property 78.00 80.30
Personal property 10.00 8.96
Registered motor vehicles 10.00 8.96
Public service company system property 2.00 1.79
Tax levy by property type (dollars)
Real property 16,380,000.00 17,367,949.57
Personal property 2,100,000.00 1,937,295.65
Registered motor vehicles 2,100,000.00 1,937,295.65
Public service company system property 420,000.00 387,459.13
Total personal and public service company 4,620,000.000 4,262,050.43
A Citizens’ Guide to the Revaluation and Assessment of Property by North Carolina Counties 31
Conclusion
Revaluations are conducted to ensure that property owners bear a share of the total tax burden that
is proportionate to the value of taxable property they own. While revaluations may be politically
unpopular, infrequent reassessments of real property have been linked to systematic bias against
certain groups of property owners in the property tax structure
166
as well as general lack of assessment
uniformity.
167
Numerous requirements set forth in the Machinery Act operate to make the revaluation
process more transparent for taxpayers. Boards of county commissioners must conduct a public hearing
before adopting the schedule of values. Assessors must notify taxpayers of any change in real property
valuation before the board of E&R convenes. e hearings and deliberations of the board of E&R are
public. By comparing the revenue-neutral tax rate published in the taxing unit’s budget with the rate
adopted by a taxing unit, citizens can ascertain whether a reduction in the tax rate in a revaluation
year is a revenue-neutral reduction, or, instead, a rate reduction that represents an increase in the
tax levy. Ironically, this level of visibility and transparency may fuel criticism by subjecting property
taxes to “a level of scrutiny rarely faced by taxes less familiar to the average taxpayer.”
168
Despite its
detractors, the property tax is likely continue to serve a critical role in the financing of local government
in North Carolina as it has since the early days of statehood.
169
Perhaps if citizens have an improved
understanding of the revaluation process, the duties and qualifications of the tax assessor, the purpose
for which reassessments are conducted, and the avenues of appeal and review, they will be less prone to
sticker shock during revaluation.
166. Jerome F. Heavey, Patterns of Property Tax Exploitation Produced by Infrequent Assessments, 42 A J
E S, October, 1983, 441-49 (reporting findings from study of tax assessments in thirty-five
Pennsylvania school districts indicating that assessment ratios were systematically biased against cities).
167. Tae Ho Eom, A Comprehensive Model of Determinants of Property Tax Assessment Quality: Evidence in New York
State, P B F, Spring 2008, 58.
168. Joan Youngman, Enlarging the Property Tax Debate—Regressivity and Fairness, 26 S T N, October 3,
2002, 45.
169. Charles D. Liner, e Evolution of North Carolina’s State and Local Tax System, in S L G
R N C: T E C S, 51, 53 (Charles D. Liner ed., 1995).
32 UNC School of Government Property Tax Bulletin
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©2008
School of Government. e University of North Carolina at Chapel Hill
