Lawmakers moving toward tax break for homebuilders

State lawmakers are moving to give North Carolina’s homebuilders a break on their property taxes by making it less expensive for builders to hold on to houses that haven’t yet sold.

Builders now pay property taxes just like any other home owner, based on the value of the structure and the lot. Under House Bill 168, builders would only be taxed on the lot’s value.

Dana Fenton, city of Charlotte lobbyist, criticized the proposal, although he did not have an estimate for how much it would cost the city.

“If a home is being built and it’s not being taxed, it still does require public services. Structures go up in flames and property theft is a real issue,” Fenton said.

Mike Carpenter, an executive vice president with the N.C. Home Builders Association, disputed this.

“An unoccupied home has fewer demands for public services than an occupied home. Nobody’s going to school from an unoccupied home,” Carpenter said. “There may be a need for police and fire protection, but … what’s continued to be collected once this bill becomes law would be adequate to cover those services.”

The bill passed the state House 110-7 June 17 and the bill’s supporters expect the Senate to support it as well.

Brian Pace of Charlotte’s Pace Development Group called the change long overdue.

“No other industry is forced to pay taxes at the full value of something it is manufacturing until such a time as it is sold,” Pace said in an email.

The state exempted all business inventory, including motor vehicles, from taxation in 1987, but didn’t consider homes as inventory.

Charlotte homebuilder Alan Banks of Evans Coghill Homes compared the change to other businesses that have benefited from tax incentives.

“It’s an economic incentive for the homebuilding industry,” Banks said. “It’s not unlike the incentive that was given to Chiquita when they moved here, because homebuilding creates jobs.”

He believes the bill would save him $750 to $1,250 per house, which would allow him to build more houses.

Of course, this means less money for both Mecklenburg County and the city of Charlotte.

“We are concerned about any legislation that erodes the tax base and reduces the number of taxpayers who share in the cost of government,” Mecklenburg County lobbyist Brian Francis said in an email.

Carpenter said the bill, which was largely pushed for by his association, is partially modeled after South Carolina law. An analysis prepared by the National Association of Home Builders estimates the bill would increase the number of homes built statewide by about 500. That is less than a 2 percent increase in total production but could bring more than 2,000 jobs to the state, according to the association.

The PAC donated $73,950 to political candidates in the fourth quarter of 2014. That is more than four times as much as it donated in the third quarter and almost 10 times as much as it donated in the fourth quarter of 2013, according to N.C. State Board of Elections records.

Carpenter, though, said that the increase had to do with the timing of the election cycle.

N.C. Rep. Tricia Cotham, a Matthews Democrat, who received $1,000 from the PAC last April, was among the bill’s sponsors. She did not return two calls for comment.

N.C. Rep. Rodney Moore, a Charlotte Democrat, also helped sponsor the bill. The homebuilders did not contribute to his most recent campaign.

“This particular bill made sense,” Moore said. “It’s hard to tax property that hasn’t been sold.”

This story was originally published June 28, 2015 at 6:28 PM with the headline "Lawmakers moving toward tax break for homebuilders."