North Carolina Senate Committee Advances 'Truth in Taxation' Property Tax Bill

A North Carolina Senate committee advanced a bill on Tuesday that aims to increase transparency in local property taxation by requiring public hearings and explicit notifications before local governments can collect more revenue following a property revaluation.

The state Senate Committee on State and Local Government voted on June 16 to advance Senate Bill 992. The legislation would prohibit local governments from adopting a property tax rate that exceeds the “revenue-neutral tax rate” during a year of general property reappraisal unless they follow a specific public disclosure process.

The revenue-neutral rate is defined as the tax rate that would generate the same amount of property tax revenue as the previous year, excluding revenue from new construction. Under the proposed law, if a local governing body intends to adopt a rate higher than this, it must first approve a resolution or ordinance and hold a public hearing on the matter.

Furthermore, the bill mandates that a detailed notice be sent to every taxpayer. According to the bill’s text, this notice must consolidate information for all relevant taxing units and provide a clear comparison for the property owner. It must include the taxing unit's proposed budget, the calculated revenue-neutral tax rate, the proposed higher tax rate, the property tax amount due for the current year, and the estimated tax due for the upcoming year under both the revenue-neutral rate and the proposed new rate.

This process is designed to prevent what critics call “silent tax increases,” where rising property assessments lead to significantly higher tax bills for business and residential property owners, even if the official tax rate remains unchanged. By forcing an explicit vote and public hearing to exceed the revenue-neutral rate, the bill aims to make any tax increase a deliberate and public decision.

Should a local government fail to follow these procedures and still collect taxes at a rate above the revenue-neutral level, the bill includes a significant enforcement mechanism. According to a summary of the legislation, the taxing authority “must refund any amount of property tax collected in excess of the amount that would have been collected under the revenue-neutral rate.”

While new to North Carolina, this legislative model, often called “Truth in Taxation,” has been implemented in other states. According to Americans for Tax Reform, Utah enacted what is considered the “gold standard” of such laws in 1985. Former Utah Senator Howard Stephenson has noted that while the law doesn't technically cap property taxes, it “makes local elected officials think twice about increasing property tax rates because they know all citizens will be notified.”

More recently, Kansas implemented a similar law in 2021. A report from the National Taxpayers Union Foundation found that in the following year, more than half of the state's taxing authorities voted against raising taxes. The foundation credits Utah's long-standing law with helping it consistently rank among the states with the lowest property taxes in the nation.

Sponsored by Senators Ford, B. Newton, and McInnis, the North Carolina bill seeks to bring that same level of accountability to the state’s local governments, ensuring that revenue windfalls from rising property values are not automatically captured without public input.

For small and mid-sized businesses, property taxes are a significant and often unpredictable operating expense. The transparency measures proposed in this bill are a welcome step, but they are not a passive benefit. This legislation shifts the dynamic, requiring business owners to be more vigilant and engaged in local fiscal policy. It's no longer enough to simply pay the annual bill; owners must now monitor notices about revenue-neutral rates and be prepared to analyze the impact of proposed increases on their budgets and cash flow. In our experience, proactive financial management is key. This new process creates an opportunity for businesses to advocate for their interests at public hearings, but only if they are paying attention. Understanding how these local tax shifts fit into a company's broader financial strategy is crucial for long-term planning and stability. This is a core part of the comprehensive tax preparation and compliance services we provide, helping clients navigate the complexities of both state and local tax changes. For a detailed assessment of how legislative shifts could impact your business, contact C&S Finance Group LLC at csfinancegroup.com.

Following its approval in the State and Local Government Committee, Senate Bill 992 now heads to the North Carolina Senate Finance Committee for further consideration. Business owners, property taxpayers, and local government associations will be closely watching the bill's progress, as its potential enactment would represent a fundamental change in how property tax increases are debated and approved across the state.