Agenda - 09-20-2007-2c - Laserfiche WebLink

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The North Carolina League of Municipalities Page 7 of 16 OPEB-A bill with positive financial implications for local governments, SB 580 -State Treasurer/Local OPEB Investrne~zts (SL 2007-384, was enacted into law this session. The act establishes the Local Government Other Post-Employment Benefits Fund in the Office of the State Treasurer and authorizes local governments to contribute to the fund. The Treasurer will be able to make investments that are likely to allow a greater rate of return than would be achieved by local investment. The accumulated contributions are to be used to provide other post-employment benefits to former employees of participating local governments and beneficiaries of former employees who are entitled to other employment benefits. The bill also authorizes local governments to establish other irrevocable trusts to fund post-employment benefits and provides similar authority for the law enforcement officers' Special Separation Allowance. The bill was a top priority of the League and was strongly supported by municipal finance officers. Standards for local government accounting and fmancial reporting require that cities accrue the liability for post-employment benefits such as health insurance and life insurance costs. Cities must show the present value of these future benefits for current employees on their balance sheets. The accrued liabilities can be quite large, and local governments need additional options for investments if they choose to pre-fund the benefits. Property Tax-Property tax relief was an issue on many legislators' minds this session. Numerous proposals were introduced but ultimately FIB' 1499 -Property Tax and PUV Changes a~:d Studies was the one that passed. It increases the benefit of the property tax homestead exclusion by raising both the income eligibility limit and the amount excluded from taxation to $25,000. The bill authorizes the Revenue Laws Study Committee to study whether and how to index the minimum amount that is excluded from tax. The bill also provides for a property tax deferral benefit for North Carolina residents who have owned and occupied property located in the state as a permanent residence for at least five years and are either 65 years of age or older or totally and permanently disabled. The amount of taxes deferred would be based upon the income eligibility limit of the property tax homestead exclusion. Under this "circuit breaker" system, an owner who met the eligibility requirements and made less than the income eligibility limit could elect to defer the portion of taxes imposed on the permanent residence that exceeds 4% of the owner's income. An owner who met the requirements of the circuit breaker benefit and made between the income eligibility limit and one and one-half times the income eligibility limit could elect to defer the portion of taxes imposed on the permanent residence that exceeds 5% of the owner's income. Taxes deferred via the circuit breaker benefit would accrue interest and become a lien on the real property of the taxpayer. The general rule is that these deferred taxes would be carried forward until the death of the owner or until the owner transfers the property, at which time the amount of taxes for that year with no circuit breaker benefit plus those taxes deferred for the preceding three fiscal years, together with interest; would become due and payable within nine months after the date of death or transfer. An exception to this rule allows the deferral to continue when the residence is transferred to the owner's spouse, if the spouse qualifies for the circuit breaker benefit, occupies the property as a permanent residence, and elects to continue deferral. If the owner ceases to use the property as a permanent residence for a reason other than a temporary absence for reasons of health or an extended absence while confined to a rest home or nursing home while the residence remains either unoccupied or occupied by the owner's spouse or other dependent, the owner loses the benefit of the circuit breaker, and the deferred taxes become due and payable at the same time the tax levied on the residence in that year is due. If the owner fails to qualify for the circuit breaker benefit for a taxable year but continues using the property as a permanent residence, no deferral is allowed for that year but deferred taxesfrom earlier years do not become due. The circuit breaker provisions are effective July 1, 2009. Finally, the bill modifies the present-use value requirements for agricultural land used as an aquatic species farm and authorizes the Revenue Laws Study Committee to study various modifications and expansions to the present-use value system. SB 646 - E~:act Waterfratt Access Study Commission Recommei:datior:s provides a special use value classification system for "working waterfront property" similar to the current agricultural present use value system. Working waterfront property is described as property that has, for the most recent three-year period, produced an average gross income of at least $1,000 and is either a pier that extends into coastal fishing waters and limits access to those who pay a fee or is land that is adjacent to coastal fishing waters and is primarily used for a commercial fishing operation or fish processing, including adjacent land that is under improvements used for one of these purposes. Another proposal on present use value, HB 1889 - Present Use Value System Modifications, was not enacted but it passed the House and will be eligible in 2008. It would classify wildlife conservation land as property that must be appraised at present use value. http://www.Helm..org/LegaUBulletin/2007/08-24-07.htm 8/28/2007