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Bill expanding time to pay back-taxes could be unconstitutional

Pending state legislation that would allow Mecklenburg County property owners five interest-free years to pay back-taxes created by the flawed 2011 revaluation could violate the state’s constitution.

Under the bill introduced by state Sen. Jeff Tarte of Cornelius, those property owners would pay monthly installments for five years with no interest. If they missed a payment, the owed amount would become due immediately with interest, Tarte said.

But giving one set of taxpayers a tax break – and not the others – is unconstitutional, county commissioner Bill James said the board has been told by lawyers “repeatedly.”

“I’m no lawyer and I have no problem if Jeff and the legislature basically want to give these taxpayers a zero-interest loan,” said James, a Republican. “It was obviously Mecklenburg County’s fault. I’m just saying that the board was told on several occasions that it was illegal to do so.

“Eliminating the interest would violate the N.C. constitution as it would be a tax break to one set of taxpayers.”

James said the board agreed that property owners needed to be given time to pay the unexpected back taxes. But taking five years to pay could increase the bill by 50 percent or more, he said. The board passed a motion giving property owners two years to pay up – but with a 9.5 percent interest rate.

Tarte, also a Republican, said he’s unconcerned about his bill’s constitutionality, saying it treats everyone affected by the flawed revaluation the same. If taxpayers have already paid their taxes with interest, the bill requires the county to refund the interest to them.

“Everybody that’s in it, gets treated the same way,” Tarte said. “It’s everyone who was in that four-year window (from 2011 to 2014).”

He said the bill was vetted by legislative staff. “Staff and everyone have looked it over, and said it’s OK,” he said.

Initially, Tarte’s bill included charging property owners the “statutory rate” of interest over the five years, which would have been about 9.5 percent a year for any unpaid property taxes. But he amended the bill to making the payments interest-free as long as the monthly installments were made.

That bill passed the Senate last week and is awaiting House action.

County Attorney Marvin Bethune declined Wednesday to provide his opinion on the bill’s constitutionality, saying he doesn’t offer legal opinions for “third parties.”

Christopher McLaughlin, a public law and government professor at the UNC Chapel Hill government school, said no one knows if the bill adheres to the state constitution. He said governments treat taxpayers differently “all the time” when taxing property owners.

“But as long as a bill has statewide application, you can do what you want,” said McLaughlin, who specializes in the law of property tax assessment and collection. “I don’t think the bill is patently unconstitutional, but it might be. I don’t think anybody really knows until it becomes an issue.”

It might become an issue – if it passes.

Commissioners Chairman Trevor Fuller, a Charlotte lawyer, intimated that the county could challenge the bill if it passes. He said he hasn’t fully studied the bill and is unsure about its constitutionality.

But he is sure that the zero-interest provision is unfair.

“It’s unfair that some people get an advantage of not having to pay their taxes for a period of time and really not face any consequences,” Fuller said. “I get it that it wasn’t their fault. But now that we have established what the proper taxing was, or should have been, then that’s when their obligation begins.

“But if you want the advantage now of paying back-taxes over a period of time – it’s unfair that you can have free money when others can’t.”

If the bill becomes law, “then we’ll have to deal with it,” Fuller said. “If it’s the law of the state we’ll be duty-bound to follow it – unless we determine it is unlawful.”

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