Exempt Builders’ Inventory (North Carolina General Statues 105-277.02)
(For further information from the UNC-Chapel Hill School of Government concerning Exempt Builders Inventory, refer to New Exclusion for Improvements to Residential and Commercial Real Property)
In 2015, the General Assembly enacted legislation authorizing builders to avoid paying property taxes on certain real property held for sale, beginning with the 2016-17 tax year. The new statute defines a builder as "a taxpayer engaged in the business of buying real property, making improvements to it, and reselling it." There are somewhat different provisions for commercial and residential property that is held for sale.
A builder must submit an application each year that the exemption is claimed in order to be considered for the exemption. Completed applications must be filed with the Durham County Tax Administration office during the regular listing period, which is from January 1 through January 31 of each year. A separate application must be submitted for each parcel on which a land or building improvement exemption is claimed.
Late applications may be considered for good cause, as determined by the Durham County Board of Equalization and Review, through the last day of the calendar year in which the tax is levied. The Tax Administration office does not have the authority to approve a late application. The burden of proving both verifiable good cause for the late application and eligibility for the requested exemption lies with the taxpayer. A late application received after the calendar year ends will not be accepted and cannot be considered for approval or denial for any reason or circumstance
Builder Property Tax Exemption applications are available for download at this location.
IMPORTANT: When real property is transferred from an exempt or partially exempt owner to a taxable owner prior to July 1, that property is taxable for the entire year as if the taxable owner owned the property as of January 1. Therefore, any residential or commercial property that receives an exemption under this program, and then transfers to a non-qualifying buyer before July 1, will be fully taxed for that year.
When owned by a qualified builder, the program exempts from taxation the increase in property value attributable to any of the following:
- Subdivision of a parcel for future residential construction
- Non-structural improvements (grading, streets, utilities, etc.) for future residential construction
- Construction of a new single-family home or duplex
To be eligible, the property must continue to be owned by a builder, must not be occupied by a tenant, and must not be used as a model home or for any other commercial purposes. The statute specifically applies only to new construction; therefore, renovations to an existing residence cannot qualify.
The exemption is limited to three years from the date the property was first subject to be listed by the builder. Remember that improvements must be in place on January 1 of the year in which application is made, regardless of the stage of completion. If a property is improved in stages, each improvement might qualify for a separate exemption based on its own listing date.
When owned by a qualified builder, commercial property may benefit from the new exemption for a maximum of five years, but the commercial property exemption covers only the increase in value attributable to subdivision or non-structural improvements (grading, streets, utilities, etc.). Any improvement that requires the issuance of a building permit terminates eligibility for the exemption.