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Refunds and Releases 14 3. Which taxes must be released or refunded under G.S. 105 -381? The Machinery Act defines the term "tax" as "the principal amount of any tax, cost, penal- ties and interest imposed upon property tax or dog license tax. "" This definition means that G.S. 105 -381 controls the refund or release of all property taxes, including special service district taxes and rural fire district taxes. G.S. 105 -381 does not control the refund or release of other local taxes, such as privilege license taxes and occupancy taxes, nor does it control the refund or release of costs and fees, such as special assessments and nuisance abatement costs, that by statute are collectible as property taxes. See Question 7 for details on the refund and release of other taxes and fees. 4. Does G.S. 105 -381 govern the refund or release of interest? Yes. Because the term "taxes" as used in GS 105 -381 includes interest, any refund or release of interest must conform to the restrictions in that statute. Only when interest is levied illegally or added due to a clerical error can it be released or refunded. For example, if the tax office miscal- culates the interest owed by a taxpayer, that interest charge could be refunded or released under G.S. 105 -381. What if the taxpayer claims that he or she was charged interest only because the tax office failed to send a tax bill in a timely fashion or sent an inaccurate tax bill? The North Carolina Supreme Court answered this question in the negative when it decided In re Morgan two years ago." In this case, the taxpayer listed her house with the Henderson County assessor but the house was never assessed or taxed due to tax office error. Eight years later the tax office learned of its mistake and sent retroactive tax bills, plus interest, for each year the house had escaped taxation. The taxpayer contested both the principal taxes and the interest. The Supreme Court ruled in favor of the county, approving not only the principal taxes but also the addition of inter- est to the tardy tax bills. The court's decision relied on G.S. 105 -348, which provides taxpayers with notice of their taxes regardless of when or if they receive tax bills, and G.S. 105 -394, which forgives minor defects — "immaterial irregularities" in the language of the statute — during the taxation process.14 Although the taxpayer in Morgan did not seek a release under G.S. 105 -381, the result would be the same had she done so. Morgan makes clear that it is legal for interest to accrue on taxes billed after the delinquency date due to tax office error. A release is, therefore, not justified under G.S. 105 -381. property that was disposed of prior to January 1. This relatively common situation involves a dispute over the valuation of the taxpayer's aggregate personal property as opposed to a dispute over the existence of taxable property. Accordingly, the taxpayer's opportunity to contest the issue should be through the list- ing and appraisal appeal period, not through the refund and release process. 12. G.S. 105- 273(15). 13. 362 N.C. 339, 661 S.E.2d 733 (2008). 14. For more on Morgan and the immaterial irregularity provisions, please see Christopher B. McLaughlin and Stan C. Duncan, "Discovery, Immaterial Irregularity, and the Morgan Decision," Prop- erty Tax Bulletin No. 147 (March 2009), available online at www.sog.unc.edu /pubs /electronicversions / pdfs /ptbl47.pdf. © 2010 School of Government. The University of North Carolina at Chapel Hill