This entry is reprinted from the Board Bulletin of November 4, 2011
Some property owners with appeals pending have inquired as to whether they have to pay their property tax bill prior to the appeal being heard, and if so why.
State law (N.C.G.S.105-360) requires property tax be paid at par on September 1 of the fiscal year for which the taxes are levied. Taxes become delinquent on January 6 following the due date and interest begins to accrue at the rate of 2 percent for January and ¾ percent each month thereafter for any unpaid balance. No one has the authority to waive interest because it is a fixed legislative requirement with statewide application.
The law has limited provision with respect to the affect of taxes due and valuation adjustments. Senate Bill 76 amended N.C.G.S. 105-360 this year and now requires interest to be paid to property owners if the value of the property is reduced by order of the Board of Equalization and Review (BER) when the taxes have been paid. The interest is paid only on the amount of the overpayment. Overpayment of the tax bears interest at the rate of 2 percent for January and ¾ percent each month from the date the interest begins to accrue until the refund is paid. Interest accrues from the latter of the date the tax is paid and the date the tax would have been considered delinquent (January 6). A payment of interest also occurs when an order of the North Carolina Property Tax Commission reduces valuation for property appealed at that level, but only at the prevailing rate set by the Secretary of Revenue which is currently 5 percent.
Senate Bill 76 also amended N.C.G.S. 105-378 preventing the tax collector from enforcing collection on items appealed to the BER. However, enforcement restrictions do not stop the accrual of interest.
The taxpayer has the option to pay taxes in any amount prior to the delinquency date. If the assessed value changes as a result of an appeal, where taxes are paid, the property owner will receive a refund at par prior to the delinquency date. After the delinquency date, the interest on the taxes for the valuation change by the BER is paid with refund. The property owner is still responsible to pay the County interest for any unpaid taxes on the remaining valuation. If no reduction in value is made, property owners will have to pay the balance before January 5 to avoid any interest being charged on the unpaid portion. The rules relative to payment of taxes apply regardless of the payment option chosen by the taxpayer.
The BER will not hear all appeals by January 5. The BER has made only minor adjustments to overall property valuation. There are many property owners who have submitted appraisals and other information to the BER with confidence that it would result in a reduction in property value, yet upon review, the BER upheld the valuation because the information did not reflect market value on January 1, 2011. Therefore, the tax assessor advises that property owners should be cautious and not presume their information will ensure a value change after their hearing. Since interest cannot be waived, the decision to delay payment may cause more frustration to the property owner if the appeal is heard after the delinquency date and no change in value occurs. Therefore, property owners should make the determination that seems best to them based on how interest and taxes are assessed and collected.
Although the legislative calendar prevents any change to the controlling legislation for this revaluation cycle, staff will consult with the North Carolina Association of County Commissioners and the Tax Assessor's Association to explore alternatives that could be included in a future legislative agenda.