The General Assembly is in session, and for localities, that offers the hope of favorable changes to state law. North Carolina cities and counties are creations of the state and possess only as much authority as the legislature grants them.

Nowhere is this limit more apparent than in localities’ taxing power. While municipalities and counties are free to raise property tax rates, imposing new forms of taxation or raising many of the existing levies requires legislative approval. To date, bills have been filed that would allow for additional taxation in at least 21 localities. Additional measures are likely as placeholder bills are amended to provide for local tax increases.

Occupancy and meals taxes

The most common requests for additional taxing authority involve occupancy taxes. These so-called “hotel-motel taxes” are levies on the gross receipts that hotel, motels, and other places of public accommodation collect. By law hotel-motel tax revenues must be used for tourism-related projects. Localities often use these revenues to help fund civic centers and other tourism related- infrastructure projects.

Bills have been introduced to increase the occupancy taxes in Madison (bill H544), Duplin (H 843), Transylvania (H470) Pasquotank (H351), and Cumber-land (S481) counties and in Elizabeth City (H351).

The towns of Belmont (H580), West Jefferson (H125), Roanoke Rapids (H540), and Halifax County (H540) would gain the authority to impose an occupancy tax under bills introduced this session.

The Assembly had previously approved higher occupancy taxes in Carteret and Durham counties, provided the extra funds went to pay for specific projects and certain project milestones were met. Bills introduced this session would give local governments more time to meet the requirements to continue collecting the higher taxes.

Monroe, meanwhile, is seeking the power to tax food sold at restaurants. H689, introduced by Rep. Pryor Gibson, D-Anson, would allow a referendum on an additional 1 percent tax on prepared meals. Proceeds from the proposed levy would be used to help fund a Monroe civic center project.

Local sales taxes

North Carolina localities receive 2 1/2 cents of the state’s general seven cents per dollar sales and use tax. Bills are pending that would allow referendums in four counties to raise the local sales tax rate. The counties and proposed higher sales taxes are:

• Alexander, a one-cent increase, with the extra revenue earmarked for “capital and infrastructure improvements or to retire indebtedness incurred by the county for these purposes.”

• Pitt County, a one-cent increase for school and community college construction.
• Lee County, a one-half-cent increase for school construction.

• Haywood County, a one-half-cent increase for community college construction. Unlike the other three local sales tax bills that are permanent, Hay-wood’s extra sales tax would expire in six years.

Currently only Mecklenburg County imposes an additional local sales tax, with the revenues from the extra one-half-cent levy going to fund the local transit system including the construction of rail transit lines.
Voters in Gaston County rejected a higher local sales tax last year; the extra revenues would have been used for economic development or tourism-related projects.

Other taxes

Lawmakers also introduced bills to authorize land transfer taxes in four counties. H932, sponsored by Rep. Howard Hunter, D-Hertford, would allow the citizens of Gates County to vote on whether the county should adopt a 1-percent tax on land transfers. The bill would allow the funds generated to be used for any purpose unless the county commission specifies a purpose for inclusion with the referendum.

Rep. Bill Owens, D-Pasquotank, meanwhile, is the sponsor of H950, a measure that would allow the Tyrrell County Commission to adopt a land transfer tax. A referendum would not be required. The bill does not set a tax rate, though it does specify that the tax cannot exceed 1 percent of the value of the property changing hands.

Reps. Verla Insko, D-Orange, and Joe Hackney, D-Orange, have also introduced a bill to allow Orange and Chatham counties to impose land transfer taxes under similar conditions. It is H1062.

The two Orange County legislators also have introduced a bill (H802) that would let Chapel Hill create utility tax districts. Under the measure the town could create special tax districts and charge a additional month tax to fund the burying of utility lines. The fee would be $1 per month for residential and $5 per month for commercial or industrial electrical power customers.

The status of bills is available via the General Assembly’s website, www.ncga.state.nc.us/homePage.pl.

Lowrey is a contributing editor for Carolina Journal.