SESSION LAW 2009-481




AN ACT to clarify the valuation of community land trust property.


The General Assembly of North Carolina enacts:


SECTION 1.  Article 12 of Subchapter II of Chapter 105 of the General Statutes is amended by adding a new section to read:

" 105-277.17.  Taxation of community land trust property.

(a)        Classification. - Community land trust property is designated a special class of property under Section 2(2) of Article V of the North Carolina Constitution and must be appraised, assessed, and taxed in accordance with this section.

(b)        Definitions. - The following definitions apply in this section:

(1)        Community land trust developer. - A nonprofit housing development entity that is an exempt organization under section 501(c)(3) of the Code and that transfers community land trust property to a qualifying owner.

(2)        Community land trust property. - Improvements to real property that meet all of the following conditions:

a.         A fee or leasehold interest in the improvements is transferred subject to resale restrictions contained in a long-term ground lease of not less than 99 years.

b.         The community land trust developer retains an interest in the property pursuant to the deed of conveyance or the long-term ground lease.

(3)        Ground lease. - A lease between the community land trust developer of a dwelling site, as landlord, and the owner or lessee of a permanent residence constructed on the dwelling site, as tenant. The leasehold interest of the tenant in the dwelling site includes an undivided interest and nonexclusive easement for ingress and egress to the dwelling site and for the use and enjoyment of the common areas and community facilities, if any.

(4)        Income. - Defined in G.S. 105-277.1(b).

(5)        Initial investment basis. - The most recent sales price, excluding any silent mortgage amount, of community land trust property.

(6)        Qualifying owner. - A North Carolina resident who (i) occupies, as owner or lessee, community land trust property as a permanent residence and (ii) is part of a household, the annual income of which at the time of transfer and adjusted for family size is not more than one hundred percent (100%) of the local area median family income as defined by the most recent figures published by the U.S. Department of Housing and Urban Development.

(7)        Resale restrictions. - Binding restrictions that affect the price at which a qualifying owner's interest in community land trust property can be transferred for value to a subsequent qualifying owner or the community land trust developer.

(8)        Silent mortgage amount. - The amount of debt incurred by a qualifying owner that is represented by a deed of trust or leasehold deed of trust on community land trust property and that earns no interest and requires no repayment prior to satisfaction of any interest-earning mortgage or a subsequent transfer of the property, whichever occurs first.

(9)        Transfer. - Any method of disposing of an interest in real property.

(c)        Valuation. - The initial appraised value of community land trust property in the year the property first qualifies for classification under this section is the initial investment basis. In subsequent general reappraisals, the value of the community land trust property shall not exceed the sum of the restricted capital gain amount and the initial investment basis. The restricted capital gain amount is the market value of the community land trust property that would be established for the current general reappraisal if not for this classification (i) adjusted to the maximum sales price permitted pursuant to the resale restrictions effective for a hypothetical sale occurring on the date of reappraisal, if less, and (ii) subtracting the initial investment basis and any silent mortgage amount."

SECTION 2.  G.S. 105-278.6(e) reads as rewritten:

"(e)       Real property held by an organization described in subdivision (a)(8) for a charitable purpose under this section as a future site for housing for individuals or families with low or moderate incomes may be classified under this section for no more than five years. The taxes that would otherwise be due on real property exempt under this subsection shall be a lien on the property as provided in G.S. 105-355(a). The taxes shall be carried forward in the records of the taxing unit as deferred taxes. The deferred taxes are due and payable in accordance with G.S. 105-277.1F when the property loses its eligibility for deferral as a result of a disqualifying event. A disqualifying event occurs when the organization fails to constructproperty was not used for low- or moderate-income housing on the site within five years from the first day of the fiscal year the property was classified under this subsection."

SECTION 3.  G.S. 105-282.1(a)(2)c. reads as rewritten:

"c.        Special classes of property classified for taxation at a reduced valuation under G.S. 105-277(h), 105-277.1, 105-277.1C, 105-277.10, 105-277.13, 105-278, or 105-277.15.105-277.15, 105-277.17, or 105-278."

SECTION 4.  This act is effective for taxes imposed for taxable years beginning on or after July 1, 2010. 

In the General Assembly read three times and ratified this the 11th day of August, 2009.



                                                                    s/  Walter H. Dalton

                                                                         President of the Senate



                                                                    s/  Joe Hackney

                                                                         Speaker of the House of Representatives



                                                                    s/  Beverly E. Perdue




Approved 1:23 p.m. this 26th day of August, 2009