The Builders Inventory Exemption grants exemption for a limited time to improvements made by a builder or developer and held for sale as that builder’s/developer’s inventory. Value created from the subdivision of land, non-structural improvements and structural improvements (if one-or-two family residential) may be exempted provided that the property is held for sale (offered for sale on the market and not occupied by a tenant or used as a model home).
If residential, the benefit only applies to the first three years in which the property would be taxable. For example, if construction begins in 2019 the property would be eligible to receive benefit for 2020, 2021 and 2022. A one-time application would be required by January 31st. If the property owner failed to apply in January of 2020 and did not make application until 2021, they would not be subject to retroactive exemption of the 2020 bill, nor would they be able to extend the benefits through 2023. One year of the benefit would have been lost.
Should the property be transferred into another ownership (such as when the home is sold) the exempt status would be lost. If the property ceases to be held for sale (such as if it were occupied by a tenant), the exempt status would be lost.
If exempt status is lost on June 30 or earlier, the property will be taxable for the entire year. If exempt status is lost on July 1 or later, the property will be exempt for the entire year.
Single or two-family residential structures may qualify for this exemption. Three-or-more family structures and commercial/industrial structures are not eligible.
If commercial/industrial, subdivision of land and non-structural improvements may be eligible but eligibility is lost when the first permit for a structure is issued. So long as it remains land-only and is held by a builder/developer for sale, exemption may be granted for up to five years after the improvement was first required to be listed for taxes. For example, if construction began in 2019, the property may be eligible for 2020, 2021, 2022, 2023 and 2024. A one-time application would be required by January 31st.
In all cases, the property owner must be the builder/developer who constructed the improvements. If one builder/developer purchases from another, the exemption is lost (although, any added value after the transfer could be subject to exemption). If the person who has made the improvements is not a builder/developer they are not eligible for this exemption. A builder/developer is defined as “a taxpayer engaged in the business of buying real property, making improvements to it, and reselling it.” [NCGS 105-273(3a)]
NOTE: The Builders Inventory Exemption applies only to improvements made on or after July 1, 2015.
Application for exemption is timely submitted by January 31st of the year for which applied. A one-time application must be made for the exemption is to be received.