(1) Power of taxation. The power of taxation shall be exercised in a just and equitable manner, for public purposes only, and shall never be surrendered, suspended, or contracted away.
(2) Classification. Only the General Assembly shall have the power to classify property for taxation, which power shall be exercised only on a State-wide basis and shall not be delegated. No class of property shall be taxed except by uniform rule, and every classification shall be made by general law uniformly applicable in every county, city and town, and other unit of local government.
(3) Exemptions. Property belonging to the State, counties, and municipal corporations shall be exempt from taxation. The General Assembly may exempt cemeteries and property held for educational, scientific, literary, cultural, charitable, or religious purposes, and, to a value not exceeding $300, any personal property. The General Assembly may exempt from taxation not exceeding $1,000 in value of property held and used as the place of residence of the owner. Every exemption shall be on a State-wide basis and shall be made by general law uniformly applicable in every county, city and town, and other unit of local government. No taxing authority other than the General Assembly may grant exemptions, and the General Assembly shall not delegate the powers accorded to it by this subsection.
(4) Special tax areas. Subject to the limitations imposed by Section 4, the General Assembly may enact general laws authorizing the governing body of any county, city, or town to define territorial areas and to levy taxes within those areas, in addition to those levied throughout the county, city, or town, in order to finance, provide, or maintain services, facilities, and functions in addition to or to a greater extent than those financed, provided, or maintained for the entire county, city, or town.
(5) Purposes of property tax. The General Assembly shall not authorize any county, city or town, special district, or other unit of local government to levy taxes on property, except for purposes authorized by general law uniformly applicable throughout the State, unless the tax is approved by a majority of the qualified voters of the unit who vote thereon.
(6) Income tax. The rate of tax on incomes shall not in any case exceed ten percent, and there shall be allowed personal exemptions and deductions so that only net incomes are taxed.
(7) Contracts. The General Assembly may enact laws whereby the State, any county, city or town, and any other public corporation may contract with and appropriate money to any person, association, or corporation for the accomplishment of public purposes only.
(1969, c. 872, s. 1; c. 1200, s. 1.)
Cross References. - For provisions authorizing counties and cities to contract with and appropriate money to private entities in order to carry out any authorized public purpose, see G.S. § 153A-449 and § 160A-20.1, respectively.
As to taxation of improvements on qualifying brownfields, see G.S. § 105-277.13.
History Note. - The provisions of subsections (1), (2) and (6) of this section are similar to those of Art. V, § 3, Const. 1868, as last amended in 1962. The provisions of subsection (3) are similar to those of Art. V, § 5, Const. 1868, as last amended in 1962.
Editor's Note. - Pursuant to Session Laws 1969, c. 872, s. 7, and c. 1200, s. 7, subsection (6) of this section is set out as rewritten by the amendment proposed by Session Laws 1969, c. 872, s. 1 and adopted by vote of the people.
Legal Periodicals. - For article, "The Battle of Exemptions," see 19 N.C.L. Rev. 154 (1941).
For brief discussion of provisions of the Constitution of 1868 similar to subsections (1), (2) and (6) of this section, see 25 N.C.L. Rev. 504 (1947).
For article on property tax classification and exemption, see 37 N.C.L. Rev. 115 (1959).
For comment on the public purpose doctrine, see 3 Wake Forest Intra. L. Rev. 37 (1967).
For article, "State Jurisdiction To Tax Tangible Personal Property," see 56 N.C.L. Rev. 807 (1978).
For survey of 1978 constitutional law, see 57 N.C.L. Rev. 958 (1979).
For article, "A Decade of Preservation and Preservation Law," see 11 N.C. Cent. L.J. 214 (1980).
For article on the need to reform North Carolina property tax law, see 59 N.C.L. Rev. 675 (1981).
For survey of 1980 tax law, see 59 N.C.L. Rev. 1233 (1981).
For note on the rejection of the "public purpose" requirement for state tax exemption, see 17 Wake Forest L. Rev. 293 (1981).
For article, "All the News That's Fit to Tax: First Amendment Limitations on State and Local Taxation of the Press," see 21 Wake Forest L. Rev. 59 (1985).
For note on the North Carolina sales and use tax exemption for newspapers, in light of In re Village Publishing Corp., 312 N.C. 211, 322 S.E.2d 155 (1984), appeal dismissed, 472 U.S. 1001, 105 S. Ct. 2693, 86 L. Ed. 2d 710 (1985), see 21 Wake Forest L. Rev. 145 (1985).
For article on mail-order ministries under the G.S. 170 charitable contribution deduction, see 11 Campbell L. Rev. 1 (1988).
For note, "Municipal Ownership of Cable Television Systems: Madison Cablevision, Inc. v. City of Morganton," see 68 N.C.L. Rev. 1295 (1990).
For note, "State v. Whittle Communications: Allowing Local School Boards To Turn On 'Channel One'," see 70 N.C.L. Rev. 1929 (1992).
For article, "The Creation of North Carolina's Limited Liability Corporation Act," see 32 Wake Forest L. Rev. 179 (1997).
For note, "Choosing Fairness over Fundamentals: How Bailey v. North Carolina Undermines the Constitutional Prohibition Against the State Contracting Away Its Power of Taxation," see 77 N.C. L. Rev. 2215 (1999).
For note, "Will North Carolina Vouch for Zelman? Examining the Constitutionality of School Vouchers in North Carolina in the Wake of Zelman v. Simons-Harris," see 81 N.C.L. Rev. 2419 (2003).
For comment, " 'Don't Know What a Slide Rule Is For': The Need for a Precise Definition of Public Purpose in North Carolina in the Wake of Kelo v. City of New London," see 28 Campbell L. Rev. 291 (2006).
For article, "Blinson v. State and the Continued Erosion of the Public Purpose Doctrine in North Carolina," see 87 N.C.L. Rev. 644 (2009).
For article, "Constitutional Threats in the E-Commerce Jungle: First Amendment and Dormant Commerce Clause Limits on Amazon Laws and Use Tax Reporting Statutes," see 89 N.C.L. Rev. 2011 (2011).
For article, "What Exactly Is a 'Substantial Constitutional Question' for Purposes of Appeal to the North Carolina Supreme Court?," see 33 Campbell L. Rev. 211 (2011).
I. General Consideration.
II. Power of Taxation.
III. Public Purposes.
A. In General.
B. Illustrative Cases.
A. In General.
B. Illustrative Cases.
A. In General.
B. State, County and Municipal Property.
C. Exemption of Property by General Assembly.
I. GENERAL CONSIDERATION.
Editor's Note. - Some of the cases cited below were decided under corresponding provisions of the Constitution of 1868, and under this section as it read before the revision of this Article by the amendment adopted Nov. 3, 1970, and effective July 1, 1973.
Applicability of Limitations. - For case holding that limitations similar to those in subsections (1) to (3) of this section relate solely to the taxation of real and personal property, and are irrelevant in respect of the validity of a local sales and use tax act, see Sykes v. Clayton, 274 N.C. 398, 163 S.E.2d 775 (1968).
The equality and uniformity required by the State Constitution in property taxation does not apply to inheritance or succession taxation. Rigby v. Clayton, 274 N.C. 465, 164 S.E.2d 7 (1968). See also, In re Davis, 190 N.C. 358, 130 S.E. 22 (1925).
For case holding that the requirement of uniformity extends to license, franchise and other forms of taxation, see Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Taxes and Local Assessments for Public Improvements Distinguished. - There is a distinction between local assessments for public improvements and taxes levied for purposes of general revenue. It is true that local assessments may be a species of tax, and that the authority to levy them is generally referred to the taxing power, but they are not taxes within the meaning of that term as generally understood in constitutional restrictions and exemptions. Southern Ry. v. City of Raleigh, 9 N.C. App. 305, 176 S.E.2d 21 (1970), aff'd, 277 N.C. 709, 178 S.E.2d 422 (1971).
Police Power More Extensive Than Legislative Authority to Expend Tax Money. - The power of the State to regulate privately owned institutions under its police power is more extensive than the authority of the legislature to expend tax money for the accomplishment of the same purpose. Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
Laches as Bar to Constitutional Challenge to 1970 Amendments. - Where more than 18 years elapsed between the 1970 ballot and the defendants' claim of unconstitutionality of the 1970 amendments and where taxpayer stated that he did not recognize the effects of the amendment until his taxes rose in 1985, he did not claim that he was precluded from ascertaining the import of the amendment or the constitutionality of its passage before 1985, or until January 8, 1989, when he filed his answer, a county was materially prejudiced by the defendants' delay because the passage of time prevented the county from presenting evidence supporting the fact that the ballot was understandable to voters. Franklin County v. Burdick, 103 N.C. App. 496, 405 S.E.2d 783 (1991).
While the mere passage of years does not in itself entitle the plaintiff to the bar of laches, an unreasonable length of time resulting in prejudice to the opposing party does so entitle the plaintiff. Franklin County v. Burdick, 103 N.C. App. 496, 405 S.E.2d 783 (1991).
A tax on indictments, civil suits, etc., is not a "tax" within the meaning of this section. State ex rel. Hewlett v. Nutt, 79 N.C. 263 (1878).
Drainage district assessments are not taxes. Northampton County Drainage Dist. Number One v. Bailey, 326 N.C. 742, 392 S.E.2d 352 (1990).
The North Carolina Sales and Use Tax Act does not violate the equal protection clause of U.S. Const., Amend. XIV or the principle of equitable taxation found in this section. In re Assessment of Additional N.C. & Orange County Use Taxes, 312 N.C. 211, 322 S.E.2d 155 (1984), appeal dismissed, 472 U.S. 1001, 105 S. Ct. 2693, 86 L. Ed. 2d 710 (1985).
A bailment surcharge imposed on each case of distilled spirits shipped from ABC warehouse to ABC stores is not a tax; the cost of liquor enforcement is a burden incident to the privilege of buying spirituous liquors in the State and such a surcharge is not unconstitutional as a tax imposed in violation of N.C. Const., Art. II, § 23 or of this section. North Carolina Ass'n of ABC Bds. v. Hunt, 76 N.C. App. 290, 332 S.E.2d 693, cert. denied, 314 N.C. 667, 336 S.E.2d 400 (1985).
Council Could Not Be Estopped From Terminating Unauthorized Payments Without Notice. - Where a town's resolution appropriating a certain percentage of its alcoholic beverage control revenue to county school board was outside the authority of the town council, the town council could not be estopped from terminating the unauthorized payments without notice. Watauga County Bd. of Educ. v. Town of Boone, 106 N.C. App. 270, 416 S.E.2d 411 (1992).
Legislature had a rational basis for taxing businesses hosting live entertainment differently than moving picture shows, as the former placed greater demands on public resources, created greater risks, and generated larger revenues than the latter. Deadwood, Inc. v. N.C. Dep't of Revenue, 356 N.C. 407, 572 S.E.2d 103 (2002).
Applied in In re Forsyth County, 285 N.C. 64, 203 S.E.2d 51 (1974); Master Hatcheries, Inc. v. Coble, 21 N.C. App. 256, 204 S.E.2d 395 (1974); North Carolina ex rel. Horne v. Chafin, 62 N.C. App. 95, 302 S.E.2d 281 (1983); State v. Whittle Communications, 328 N.C. 456, 402 S.E.2d 556 (1991); Coley v. State, 360 N.C. 493, 631 S.E.2d 121 (2006); Cape Hatteras Elec. Mbrshp. Corp. v. Lay, 210 N.C. App. 92, 708 S.E.2d 399 (2011); Saine v. State, 210 N.C. App. 594, 709 S.E.2d 379 (2011).
Cited in In re North Carolina Forestry Found., Inc., 35 N.C. App. 414, 242 S.E.2d 492 (1978); In re Arcadia Dairy Farms, Inc., 43 N.C. App. 459, 259 S.E.2d 368 (1979); W.R. Co. v. North Carolina Property Tax Comm'n, 48 N.C. App. 245, 269 S.E.2d 636 (1980); In re McElwee, 304 N.C. 68, 283 S.E.2d 115 (1981); Kiddie Korner Day Schools, Inc. v. Charlotte-Mecklenburg Bd. of Educ., 55 N.C. App. 134, 285 S.E.2d 110 (1981); North Carolina Sav. & Loan League v. North Carolina Credit Union Comm'n, 302 N.C. 458, 276 S.E.2d 404 (1981); In re Southview Presbyterian Church, 62 N.C. App. 45, 302 S.E.2d 298 (1983); In re Chapel Hill Residential Retirement Center, Inc., 60 N.C. App. 294, 299 S.E.2d 782 (1983); In re City of Durham Annexation Ordinance Numbered 5991 for Area A, 69 N.C. App. 77, 316 S.E.2d 649 (1984); Hed, Inc. v. Powers, 84 N.C. App. 292, 352 S.E.2d 265 (1987); Cheape v. Town of Chapel Hill, 320 N.C. 549, 359 S.E.2d 792 (1987); Barnhill San. Serv., Inc. v. Gaston County, 87 N.C. App. 532, 362 S.E.2d 161 (1987); In re Worley, 93 N.C. App. 191, 377 S.E.2d 270 (1989); In re Moravian Home, Inc., 95 N.C. App. 324, 382 S.E.2d 772 (1989); Thrash v. City of Asheville, 95 N.C. App. 457, 383 S.E.2d 657 (1989); Edward Valves, Inc. v. Wake County, 343 N.C. 426, 471 S.E.2d 342 (1996), cert. denied, 519 U.S. 1112, 117 S. Ct. 952, 136 L. Ed. 2d 839 (1997); In re Springmoor, Inc., 348 N.C. App. 1, 498 S.E.2d 177 (1998); Delhaize Am., Inc. v. Lay, 222 N.C. App. 336, 731 S.E.2d 486 (2012); ACTS Retirement-Life Cmtys., Inc. v. Town of Columbus, - N.C. App. - , 789 S.E.2d 527 (2016).
II. POWER OF TAXATION.
A sovereign state, as one of its inherent attributes, has the power of taxation, which must be exercised by its legislative branch. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
A county is not a sovereign and does not have inherent power to levy taxes. A county must derive its taxing power from the State Constitution or from the State's legislative enactments. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
A county board of elections does not have taxing power. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
The power to levy taxes is the exclusive province of the legislature, and the superior court has no jurisdiction of an action, the nature and purpose of which is to discover, to list and to assess for taxation, property which has escaped taxation. Henderson County v. Smyth, 216 N.C. 421, 5 S.E.2d 136 (1939).
This section of the Constitution vests exclusive authority in the legislature to levy taxes, which may not be interfered with by the courts. Person v. Board of State Tax Comm'rs, 184 N.C. 499, 115 S.E. 336 (1922).
Under this Article the power to levy taxes vests exclusively in the legislative branch of the government; and it is within the exclusive power of the General Assembly to provide the method and prescribe the procedure for discovery, listing and assessing property for taxation. DeLoatch v. Beamon, 252 N.C. 754, 114 S.E.2d 711 (1960).
Subsection (1) is a limitation upon the legislative power, separate and apart from the limitation contained in the law of the land clause in N.C. Const., Art. I, § 19, and the due process clause of U.S. Const., Amend. XIV. Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
Common Law Prohibition on Unreasonable Taxation Schemes Same as Constitutional Requirement to Exercise Power to Impose Taxes in a Just and Reasonalbe Matter. - Common law prohibition on unreasonable taxation schemes was the same or substantially the same as the constitutional provision in N.C. Const., Art. V, § 2(1) requiring the power to impose taxes to be exercised in a "just and equitable manner." Smith v. City of Fayetteville, 220 N.C. App. 249, 725 S.E.2d 405 (2012).
Application of G.S. § 105-116 to Electric Cooperative Did Not Violate Rights. - Section § 105-116 taxes billings for electrical service rendered by cooperatives in the same manner as billings for service rendered by investor-owned utilities; therefore, application of the section to an electric cooperative did not violate that entity's right under N.C. Const., Art. I, § 19, this section, or N.C. Const., Art. V, § 3. Four County Elec. Membership Corp. v. Powers, 96 N.C. App. 417, 386 S.E.2d 107 (1989), cert. denied and appeal dismissed, 326 N.C. 799, 393 S.E.2d 894 (1990), cert. denied, 498 U.S. 1040, 111 S. Ct. 711, 112 L. Ed. 2d 700 (1991).
City's Privilege License Tax Was Presumed Valid. - City's privilege license tax on businesses was presumed valid because, (1) under the current state of the law, the activity to be taxed was legal, and (2) the city, pursuant to G.S. § 160A-211 and G.S. § 105-109, had the authority to enact an ordinance imposing the tax. Smith v. City of Fayetteville, 220 N.C. App. 249, 725 S.E.2d 405 (2012).
Prejudice Not Shown. - Taxpayers did not show that they had standing to challenge the economic incentives that the state and local governments gave to the business to locate its computer manufacturing facility in the county, under either the Uniformity of Taxation Clauses, N.C. Const., Art. V, § 2(2) and (3) or the federal Dormant Commerce Clause, U.S. Const., Art. I, § 8, cl. 3, as the taxpayers did not show that they were prejudiced and the legislation producing the incentives, such as tax credits, promoted the permissible governmental goal of providing economic incentives to recruit business to the state in order to benefit the public. Blinson v. State, 186 N.C. App. 328, 651 S.E.2d 268 (2007), review denied, appeal dismissed, 362 N.C. 355, 661 S.E.2d 240 (2008).
Just and Equitable Clause Violated. - Increase in a city's minimum privilege license tax of 8,900 percent violated the Just and Equitable Tax Clause of the North Carolina Constitution since it was wholly detached from the moorings of anything reasonably resembling a just and equitable tax. Smith v. City of Fayetteville, 227 N.C. App. 563, 743 S.E.2d 662 (2013), dismissed and review denied 748 S.E.2d 558, 367 N.C. 238, 2013 N.C. LEXIS 1085 (2013).
III. PUBLIC PURPOSES.
A. IN GENERAL.
Construction with N.C. Const., Art. V, § 13. - N.C. Const., Art. V, § 2(1), providing for the exercise of the power of taxation for public purposes, does not conflict with N.C. Const., Art. V, § 13(1)(a), allowing the General Assembly to grant authority to develop airports and seaports, in such a manner that the airport and seaport facilities provision cannot be implemented as envisioned by the people of North Carolina. Piedmont Triad Airport Auth. v. Urbine, 354 N.C. 336, 554 S.E.2d 331 (2001), cert. denied, 535 U.S. 971, 122 S. Ct. 1438, 152 L. Ed. 2d 381 (2002).
The public purpose clause of N.C. Const., Art. V, § 2(1), regarding the exercise of taxation, acts in concert with N.C. Const., Art. V, § 13(1)(a), authorizing the General Assembly to grant authority to develop airports and seaports, and all endeavors pursuant to N.C Const., Art. V, § 13(1)(a) can be fully realized insofar as they are for a public purpose or a public use, since N.C. Const., Art. V, § 2(1) does not act as a prohibition against developing and improving airports and seaports under N.C. Const., Art. V, § 13(1)(a), but rather, N.C. Const., Art. V, § 2(1) acts as a qualifier upon such undertakings. Piedmont Triad Airport Auth. v. Urbine, 354 N.C. 336, 554 S.E.2d 331 (2001), cert. denied, 535 U.S. 971, 122 S. Ct. 1438, 152 L. Ed. 2d 381 (2002).
Taxes may be levied only for public purposes. Palmer v. County of Haywood, 212 N.C. 284, 193 S.E. 668, 113 A.L.R. 1195 (1937); Ramsey v. Rollins, 246 N.C. 647, 100 S.E.2d 55 (1957).
There can be no lawful tax which is not levied for a public purpose. Nash v. Town of Tarboro, 227 N.C. 283, 42 S.E.2d 209 (1947).
The "public purpose" requirement acts as a limitation equally upon the power to tax and the power to appropriate and expend public funds. Hughey v. Cloninger, 37 N.C. App. 107, 245 S.E.2d 543 (1978), aff'd, 297 N.C. 86, 253 S.E.2d 898 (1979).
Meaning of "Public Purpose". - A tax or an appropriation is for a public purpose if it is for the support of the government, or for any of the recognized objects of the government. Green v. Kitchin, 229 N.C. 450, 50 S.E.2d 545 (1948), discussed in 27 N.C.L. Rev. 500; Jamison v. City of Charlotte, 239 N.C. 682, 80 S.E.2d 904 (1954); Morgan v. Town of Spindale, 254 N.C. 304, 118 S.E.2d 913 (1961).
The term "public purpose," when used in connection with the expenditure of municipal funds from the public treasury, refers to such public purpose within the frame of governmental and proprietary power given to the particular municipality, to be exercised for the benefit, welfare and protection of its inhabitants and others coming within the municipal care. It involves reasonable connection with the convenience and necessity of the particular municipality whose aid is extended in its promotion. Greensboro-High Point Airport Auth. v. Johnson, 226 N.C. 1, 36 S.E.2d 803 (1946); Nash v. Town of Tarboro, 227 N.C. 283, 42 S.E.2d 209 (1947).
For a comprehensive discussion of the term "public purpose," see Mitchell v. North Carolina Indus. Dev. Fin. Auth., 273 N.C. 137, 159 S.E.2d 745 (1968).
The term "public purposes" is employed in the same sense in the law of taxation and in the law of eminent domain. Thus, if the General Assembly may authorize a State agency to expend public money for the purpose of aiding in the construction of a hospital facility to be leased to and ultimately conveyed to a private agency, it may also authorize the acquisition of a site for such facility by exercise of the power of eminent domain. Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
Although Mitchell v. North Carolina Indus. Dev. Fin. Auth., 273 N.C. 137, 159 S.E.2d 745 (1968), and its progeny remain pivotal in the development of the doctrine, they do not purport to establish a permanent test for determining the existence of a public purpose. Maready v. City of Winston-Salem, 342 N.C. 708, 467 S.E.2d 615 (1996).
Concept of "Public Purpose" Expands with Changing Conditions. - A slide-rule definition to determine the meaning of "public purpose" for all time cannot be formulated; the concept expands with the population, economy, scientific knowledge, and changing conditions. Martin v. North Carolina Hous. Corp., 277 N.C. 29, 175 S.E.2d 665 (1970); In re Denial of Approval to Issue Hous. Bonds, 307 N.C. 52, 296 S.E.2d 281 (1982).
For a use to be public its benefits must be in common and not for particular persons, interests, or estates; the ultimate net gain or advantage must be the public's, as contradistinguished from that of an individual or private entity. Martin v. North Carolina Hous. Corp., 277 N.C. 29, 175 S.E.2d 665 (1970); In re Denial of Approval to Issue Hous. Bonds, 307 N.C. 52, 296 S.E.2d 281 (1982).
The power to appropriate money from the public treasury is no greater than the power to levy the tax which put the money in the treasury. Both powers are subject to the constitutional proscription that tax revenues may not be used for private individuals or corporations, no matter how benevolent. Mitchell v. North Carolina Indus. Dev. Fin. Auth., 273 N.C. 137, 159 S.E.2d 745 (1968); Martin v. North Carolina Hous. Corp., 277 N.C. 29, 175 S.E.2d 665 (1970); Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
But the fact that moneys are paid to an individual does not affect the character of the expenditure, since the object of the expenditure and not to whom it is paid determines whether it is for a public purpose. Green v. Kitchin, 229 N.C. 450, 50 S.E.2d 545 (1948), discussed in 27 N.C.L. Rev. 500 (1949).
When Direct Disbursement of Public Funds to Private Entity Is Permissible. - Under subsection (7) of this section, direct disbursement of public funds to private entities is a constitutionally permissible means of accomplishing a public purpose, provided there is statutory authority to make such appropriation. Hughey v. Cloninger, 297 N.C. 86, 253 S.E.2d 898 (1979).
Direct Assistance to Private School Is Not Permissible. - Direct assistance to private entities such as the Dyslexia School of North Carolina, Inc., distinguishable from direct disbursements to students for educational purposes, may not be the means used to effect a public purpose. Hughey v. Cloninger, 37 N.C. App. 107, 245 S.E.2d 543 (1978), aff'd, 297 N.C. 86, 253 S.E.2d 898 (1979).
Even though the Dyslexia School of North Carolina, Inc., a private nonprofit corporation, is engaged in a clearly benevolent activity, which would not be constitutionally prohibited if provided through the public schools of Gaston County, it remains a private entity. As such, it may not receive appropriations and expenditures from public funds of Gaston County in order to achieve the desirable and commendable end of assisting in the education of the dyslexic children of Gaston County. Hughey v. Cloninger, 37 N.C. App. 107, 245 S.E.2d 543 (1978), aff'd, 297 N.C. 86, 253 S.E.2d 898 (1979).
Legislature Initially Determines What Is Public Purpose. - The initial responsibility for determining what is and what is not a public purpose rests with the legislature, and its findings with reference thereto are entitled to great weight. In re Denial of Approval to Issue Hous. Bonds, 307 N.C. 52, 296 S.E.2d 281 (1982).
But Legislative Declarations Are Not Conclusive. - A legislative declaration which asserts in general terms that the statute under consideration is enacted for a public purpose, although entitled to great weight, is not conclusive. When the facts are determined, what is a public purpose is a question of law for the court. Martin v. North Carolina Hous. Corp., 277 N.C. 29, 175 S.E.2d 665 (1970).
If an enactment is in fact for a private purpose, and therefore unconstitutional, it cannot be saved by legislative declarations to the contrary. When a constitutional question is properly presented, it is the duty of the court to ascertain and declare the intent of the framers of the Constitution, and to reject any legislative act which is in conflict therewith. In re Denial of Approval to Issue Hous. Bonds, 307 N.C. 52, 296 S.E.2d 281 (1982).
Duty of Supreme Court to Determine Constitutionality of Appropriation. - It is the duty and prerogative of the Supreme Court to determine whether an appropriation of tax funds is for a purpose forbidden by the Constitution of the State when that question is properly raised. Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
Taxpayer Action. - If an act creating a corporation is unconstitutional as violative of this section and of N.C. Const., Art. I, § 19, and U.S. Const., Amend. XIV, § 1, and is void because the purpose for which the corporation was created is not a public purpose, then a taxpayer may maintain an action to restrain state officials from paying to the corporation and the corporation from using money appropriated out of the General Fund. Martin v. North Carolina Hous. Corp., 277 N.C. 29, 175 S.E.2d 665 (1970).
B. ILLUSTRATIVE CASES.
Financing of a Competitive Basketball Team And Public Auditorium. - Agreements for the City's operation of a public auditorium/coliseum did not violate this section because they were established for a public purpose, although they increased the defendants' revenue and made the defendant-owned basketball team more competitive. Peacock v. Shinn, 139 N.C. App. 487, 533 S.E.2d 842 (2000), cert. denied, 353 N.C. 267, 546 S.E.2d 110 (2000).
Cable Television System as Public Purpose. - The provisions of Chapter 160A, Article 16, Part 1, which authorize cities to finance, acquire, construct, own, and operate a cable television system do not violate the "public purpose" clause of this section. Madison Cablevision, Inc. v. City of Morganton, 325 N.C. 634, 386 S.E.2d 200 (1989).
The establishment, financing, construction, operation, and maintenance of a cable television system by a municipality as authorized by Chapter 160A, Article 16, Part 1 involved a reasonable connection with the convenience and necessity of the city and benefited the public generally, as opposed to special interests or persons, and thus constituted a "public purpose" within the meaning of subsection (1) of this section. Madison Cablevision, Inc. v. City of Morganton, 325 N.C. 634, 386 S.E.2d 200 (1989).
State Road System. - Trial court did not err by concluding that a project's expenditures constituted a public purpose because the project was to provide travel time reliability, and a limited liability company's (LLC) private benefit was incidental to the public purpose; although the LLC would finance, construct, operate, and maintain the project, gaining incidental private benefit, the government expenditure primarily benefited the public. Wideni77 v. N.C. DOT, - N.C. App. - , - S.E.2d - (May 2, 2017).
Creation of county authorities for financing pollution abatement and control facilities or industrial facilities for private industry by the issuance of tax-exempt revenue bonds under Chapter 159A (now Chapter 159C) was not for a public purpose, and Chapter 159A (now Chapter 159C), which purported to authorize such financing, violated subsection (1) of this section. Stanley v. Department of Conservation & Dev., 284 N.C. 15, 199 S.E.2d 641 (1973).
Education, Generally. - Both appropriations and expenditures of public funds for the education of the citizens of North Carolina are for a public purpose. Hughey v. Cloninger, 37 N.C. App. 107, 245 S.E.2d 543 (1978), aff'd, 297 N.C. 86, 253 S.E.2d 898 (1979).
Employees' Retirement Fund. - A tax imposed to raise moneys for the Employees' Retirement Fund was for a public purpose, as the act provided benefits to thousands of teachers and employees of this State without discrimination, and therefore the tax did not violate this section. Bridges v. City of Charlotte, 221 N.C. 472, 20 S.E.2d 825 (1942).
Employment Contract Serves Public Purpose. - Employment and extension agreements served a public purpose pursuant to N.C. Const., Art. V, § 2(7) because by contracting to retain the employee for an extended period of time, the employer ensured that it would, for several years, have the service of a qualified fire chief without fear that the fire chief would leave the employer for a better opportunity; the employment and retention of a qualified fire chief to execute the duties contained in G.S. § 160A-292 involves a reasonable connection with the convenience and necessity of a municipality, and the employment of a fire chief benefits the public generally, not just the fire chief or special interests, because the fire chief is responsible for maintaining the safety of the city and its citizens from fire. Elliott v. Enka-Candler Fire & Rescue Dep't, Inc., 213 N.C. App. 160, 713 S.E.2d 132 (2011).
Hospital. - The construction, maintenance and operation of a public hospital by a county is a public purpose for which funds may be provided by taxation under this section. Trustees of Watts Hosp. v. Board of Comm'rs, 231 N.C. 604, 58 S.E.2d 696 (1950).
The expenditure of tax funds for the construction of a general county hospital is for a public purpose; and a county, when authorized by the General Assembly and with the approval of a majority of the voters, has as much right to issue its bonds to provide hospital facilities for those citizens who are able to pay for the services rendered to them as it does to provide such facilities for the sick and afflicted poor. Trustees of Rex Hosp. v. Board of Comm'rs, 239 N.C. 312, 79 S.E.2d 892 (1954).
The expenditure of tax funds for the construction of a hospital to be owned and operated by the State, a county, a city, a town or some other political subdivision of the State is an expenditure for a public purpose, but the expenditure of public funds raised by taxation to finance or facilitate the financing of the construction of a hospital facility to be privately operated, managed and controlled is not an expenditure for a public purpose and is thus prohibited by this section. Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
The construction and operation of a privately owned hospital is not necessarily for a public purpose within the meaning of the constitutional limitation upon the use of tax funds, and the circumstance that the privately owned hospital is not operated for profit is not determinative. Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
Hotel. - The cost of constructing and maintaining a hotel is not a public purpose, within the meaning of this section. Nash v. Town of Tarboro, 227 N.C. 283, 42 S.E.2d 209 (1947).
Industrial Development Bonds. - The issuance of revenue bonds by the Industrial Development Financing Authority, pursuant to former Chapter 123A, in order to acquire sites and to construct and equip buildings and other facilities thereon for lease to private industry, such bonds to be retired by the rental payments, was not a public use or purpose for which State tax funds could be appropriated to enable the Authority to commence its operations. Mitchell v. North Carolina Indus. Dev. Fin. Auth., 273 N.C. 137, 159 S.E.2d 745 (1968).
Inlet Relocation. - Special assessment implemented for the relocation of an inlet was upheld under N.C. Const., Art. V, § 2, cl. 1, because the assessment was imposed for a public purpose; there was a reasonable connection with the necessity of the county based on the policy of preserving beaches, and the project benefitted the public in general. Parker v. New Hanover County, 173 N.C. App. 644, 619 S.E.2d 868 (2005).
Library. - The levying of taxes for public libraries by the State, counties and municipal corporations is for "a public purpose" under this section. Jamison v. City of Charlotte, 239 N.C. 682, 80 S.E.2d 904 (1954).
Municipal Airport. - Construction and maintenance of a municipal airport for a city of more than 10,000 inhabitants, engaged in many industries and pursuits, is for a public purpose within the meaning of this section, and no right guaranteed by U.S. Const., Amend. XIV will be injuriously affected thereby. Turner v. City of Reidsville, 224 N.C. 42, 29 S.E.2d 211 (1944); City of Reidsville v. Slade, 224 N.C. 48, 29 S.E.2d 215 (1944).
Police Training. - An expenditure by a municipality for special training of a police officer is for a public purpose. Green v. Kitchin, 229 N.C. 450, 50 S.E.2d 545 (1948), discussed in N.C.L Rev. 500 (1949).
Student Loans. - Session Laws 1967, c. 1177 (G.S. § 116-209.1) which authorizes the State Education Assistance Authority to issue revenue bonds and to use the proceeds therefrom for making loans to residents of this State to enable them to obtain an education in an eligible institution does not unconstitutionally authorize use of public funds in violation of this section. State Educ. Assistance Auth. v. Bank of Statesville, 276 N.C. 576, 174 S.E.2d 551 (1970).
Opportunity Scholarship Program. - Appropriations made by the General Assembly for the Opportunity Scholarship Program are for a public purpose because the ultimate beneficiary of providing these children additional educational opportunities is our collective citizenry; the provision of monetary assistance to lower-income families so that their children have additional educational opportunities is well within the scope of permissible governmental action and is intimately related to the needs of our state's citizenry. Hart v. State, 368 N.C. 122, 774 S.E.2d 281 (2015).
Manufacturing Incentives. - Taxpayers failed to state a claim for relief under the Public Purpose Doctrine, N.C. Const., Art. V, § 2(1) and (7), regarding their challenge to state and local incentives provided to the business to locate its computer manufacturing facility in the county since they did not show that a public purpose was not involved; likewise, they also failed to state a claim for relief under the Exclusive Emoluments clause, N.C. Const., Art. I, § 32, for the same reason, especially since the incentives further a proper public purpose of providing economic incentives to recruit business to the state to further the general welfare of the public. Blinson v. State, 186 N.C. App. 328, 651 S.E.2d 268 (2007), review denied, appeal dismissed, 362 N.C. 355, 661 S.E.2d 240 (2008).
In an action challenging the constitutionality of an incentives agreement under G.S. § 158-7.1(a), judicial precedent had already determined that incentives granted pursuant to G.S. § 158-7.1(a) did not violate N.C. Const., Art. V, § 2(1) and (7). Haugh v. County of Durham, 208 N.C. App. 304, 702 S.E.2d 814 (2010), review dismissed 717 S.E.2d 397, 2011 N.C. LEXIS 683 (N.C. 2011).
A. IN GENERAL.
The Constitution requires that the rule of uniformity be observed. State ex rel. Dyer v. City of Leaksville, 275 N.C. 41, 165 S.E.2d 201 (1969).
The principles of equality and uniformity are indispensable to taxation, whether general or local. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Uniformity, in its legal and proper sense, is inseparably incident to the exercise of the power of taxation. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
A "tax" within the meaning of the constitutional prohibition against nonuniformity of taxation is a charge levied and collected as a contribution to the maintenance of the general government. It is imposed upon the citizens in common, at regularly recurring periods, for the purpose of providing a continuous revenue. State ex rel. Dorothea Dix Hosp. v. Davis, 292 N.C. 147, 232 S.E.2d 698 (1977).
Requirement of Uniformity Extends to License, Franchise and Other Forms of Taxation. - Repeated judicial interpretations extend the requirement of uniformity to license, franchise, and other forms of taxation. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Although it is not expressly provided that the tax on trades, etc., shall be uniform, yet a tax not uniform, as properly understood, would be so inconsistent with natural justice, and with the intent which is apparent in the Constitution that it may be admitted that the collection of such a tax would be restricted as unconstitutional. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
License taxes must bear equally and uniformly upon all persons engaged in the same class of business or occupation or exercising the same privileges. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Although the uniformity requirement is literally confined to taxes on property, it extends to license, franchise and other taxes. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).
Compliance with Rule of Uniformity under This Section Satisfies U.S. Const., Amend. XIV. - A tax statute which meets the rule of uniformity required by the Constitution of this State likewise conforms to the requirements of U.S. Const., Amend. XIV. Lenoir Fin. Co. v. Currie, 254 N.C. 129, 118 S.E.2d 543, appeal dismissed, 368 U.S. 289, 82 S. Ct. 375, 7 L. Ed. 2d 336 (1961).
The requirements of "uniformity," "equal protection," and "due process" are, for all practical purposes, the same under both the State and federal Constitutions. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
When Tax Is Uniform. - A tax is uniform when it is equal upon all persons belonging to the described class upon which it is imposed. Gatlin v. Town of Tarboro, 78 N.C. 119 (1878); State v. Danenberg, 151 N.C. 718, 66 S.E. 301, 26 L.R.A. (n.s.) 890 (1909); Leonard v. Maxwell, 216 N.C. 89, 3 S.E.2d 316, appeal dismissed, 308 U.S. 516, 60 S. Ct. 175, 84 L. Ed. 439 (1939).
Taxing is required to be by a uniform rule, that is, by one and the same unvarying standard. Uniformity in taxing implies equality in the burden of taxation, and this equality of burden cannot exist without uniformity in the mode of assessment, as well as in the rate of taxation. But this is not all. The uniformity must be coextensive with the territory to which it applies. If a State tax, it must be uniform all over the State. If a county or city tax, it must be uniform throughout the extent of the territory to which it is applicable. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Uniformity consists in putting the same tax upon all of the same class; that is, while the same tax must be enforced upon all innkeepers, upon all railroads, and so on throughout, a tax discriminating among persons of the same class, whereby some are required to pay more than others, would lack uniformity. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Equality within the class or for those of like station and condition is all that is required to meet the test of constitutionality under subsection (2) of this section. A tax on trades, etc., must be considered uniform when it is equal upon all persons belonging to the prescribed class upon which it is imposed. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Uniformity of taxation is accomplished when the tax is levied equally and uniformly on all subjects in the same class, and the right to classify imports a difference in the subjects of taxation. Smith v. State, 349 N.C. 332, 507 S.E.2d 28 (1998).
Uniformity with Reference to Locality and Classification. - With reference to locality, a tax is uniform when it operates with equal force and effect in every place where the subject of it is found, and with reference to classification, it is uniform when it operates without distinction or discrimination upon all persons composing the described class. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Under this section uniformity in taxation relates to equality in the burden of the State's taxpayers. In re Martin, 286 N.C. 66, 209 S.E.2d 766 (1974).
This section does not prohibit reasonable flexibility and variety appropriate to reasonable schemes of State taxation. In re Martin, 286 N.C. 66, 209 S.E.2d 766 (1974).
Scientific Uniformity Is Not Required. - The State may impose different specific taxes upon different trades and professions and may vary the rate of excise upon various products. It is not required to resort to close distinctions or to maintain a precise, scientific uniformity with reference to composition, use or value. In re Martin, 286 N.C. 66, 209 S.E.2d 766 (1974).
The rule of uniformity is observed if the rate is uniform throughout each taxing authority's jurisdiction. State ex rel. Dyer v. City of Leaksville, 275 N.C. 41, 165 S.E.2d 201 (1969).
Uniformity of taxation, as provided for by State Constitution, is required throughout the territorial limits of the taxing district. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Local taxation must be uniform upon the same class of subjects within the territorial limits of the authority levying the tax. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Rule of uniformity is not violated by double taxation from taxes levied by different authorities if each authority adheres to the uniformity rule in its levies. State ex rel. Dyer v. City of Leaksville, 275 N.C. 41, 165 S.E.2d 201 (1969).
When property is within more than one taxing authority, each has the right to make its own levy. State ex rel. Dyer v. City of Leaksville, 275 N.C. 41, 165 S.E.2d 201 (1969).
Tax on City Property and on County Property Including Property in City. - The imposition of a tax on county property, including property within a city situated therein, to provide funds for county library purposes, and the imposition of a tax within the city to provide funds for municipal library purposes, does not violate this section, notwithstanding that a greater burden of taxation will be placed on the taxpayers of the municipality, nor does it constitute double taxation, since one tax will be imposed by the city for municipal purposes and the other by the county for county purposes. Further, double taxation is prohibited by neither the State nor federal Constitutions. Jamison v. City of Charlotte, 239 N.C. 682, 80 S.E.2d 904 (1954).
Creation of Tax Districts Not Precluded by Rule of Uniformity. - Sometimes it is deemed wise to create a tax district for special purposes, generally for public improvements, such as for highway taxes, bridge taxes, drainage taxes, or the like, and to fix the boundaries of such district so as to include two or more counties or towns or even to make the district wholly independent of such political boundaries. Taxing districts may be as numerous as the purposes for which taxes are levied. Equality and uniformity of taxation does not preclude the power of the State to create separate taxing districts, provided the taxes are equal and uniform within each taxing district. State ex rel. Dyer v. City of Leaksville, 275 N.C. 41, 165 S.E.2d 201 (1969).
Wide Latitude Accorded Taxing Authorities. - The power to classify subjects of taxation carries with it the discretion to select them, and a wide latitude is accorded taxing authorities, particularly in respect of occupational taxes, under the power conferred by this section. Charlotte Coca-Cola Bottling Co. v. Shaw, 232 N.C. 307, 59 S.E.2d 819 (1950); Lenoir Fin. Co. v. Currie, 254 N.C. 129, 118 S.E.2d 543, appeal dismissed, 368 U.S. 289, 82 S. Ct. 375, 7 L. Ed. 2d 336 (1961); Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Discretion in Classification. - The power to classify subjects of taxation carries with it the discretion to select them, and a wide latitude is accorded taxing authorities. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, cert. denied and appeal dismissed, 314 N.C. 540, 335 S.E.2d 15 (1985).
Reasonableness of Classification. - The classification must not be arbitrary or unjust, but must be based on substantial and reasonable differences between the classes. Great Atl. & Pac. Tea Co. v. Doughton, 196 N.C. 145, 144 S.E. 701 (1928).
The power of the legislature to classify subjects for the purpose of taxation is flexible, and the reasonableness of any classification will generally be construed with reference to the facts of the particular case, the predominant limitation on the power to classify being that the classification must be reasonable and not arbitrary and must rest upon some substantial difference between the classes, and that the burden must be equal upon all in the same class. Southern Grain Provision Co. v. Maxwell, 199 N.C. 661, 155 S.E. 557 (1930).
The classification of subjects for taxation must be based upon reasonable distinctions and must apply equally to all within each class defined. Snyder v. Maxwell, 217 N.C. 617, 9 S.E.2d 19 (1940). See also, C.D. Kenny Co. v. Town of Brevard, 217 N.C. 269, 7 S.E.2d 542 (1940), as to municipal taxes on trades and professions.
While the General Assembly may not establish a classification that is arbitrary or capricious, a classification is constitutional if it is founded upon a reasonable distinction or difference and bears a substantial relation to the object of the legislation. In re Martin, 286 N.C. 66, 209 S.E.2d 766 (1974).
The only limitation upon the power of classification is that the classification be founded upon reasonable, and not arbitrary, distinctions. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, cert. denied and appeal dismissed, 314 N.C. 540, 335 S.E.2d 15 (1985).
A classification will be upheld if it is reasonable and not arbitrary and rests upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced will be treated alike. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).
On review, wide latitude is accorded the General Assembly; the only limitation on its power is that the classification must be founded upon reasonable, and not arbitrary, distinctions. State v. Rippy, 80 N.C. App. 232, 341 S.E.2d 98 (1986).
Courts to Determine Validity of Classifications. - The uniformity rule of this section requires the courts, when the validity of a tax statute is challenged on the ground of discrimination, to ascertain if in fact there is a difference in the classes taxed. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).
Local Assessment Based on Benefits. - The constitutional provision that taxation shall be equal, uniform, and (under previous constitutions provisions) within certain limits does not apply to local assessments imposed upon owners of property, who in respect to such ownership are to derive a special benefit in the local improvements for which the tax is expended. Cain v. Commissioners of Davie County, 86 N.C. 8 (1882).
While assessments on lands abutting on improved streets are not required to be uniform with all other subjects of taxation, and in view of the particular benefits, such must be uniform as to all property owners within that class to meet the constitutional requirements. City of Gastonia v. Cloninger, 187 N.C. 765, 123 S.E. 76 (1924).
Property Is Taxable Without Regard to Ownership. - By virtue of the provisions of this section, all property, real and personal, in this State, is subject to taxation, in accordance with a uniform rule, under laws which the General Assembly is required by the Constitution to enact, without regard to its ownership, and without regard to the purposes for which specific property is held, unless it is exempted by or under the provisions of this section. Latta v. Jenkins, 200 N.C. 255, 156 S.E. 857 (1931); Salisbury Hosp. v. Rowan County, 205 N.C. 8, 169 S.E. 805 (1933).
The interest of a county in collecting tax revenues under former G.S. § 105-281 was not within the zone of interest intended to be protected by this section; accordingly, that county could not contend that the provisions of former G.S. § 105-281 violated principles of uniformity. In re Martin, 286 N.C. 66, 209 S.E.2d 766 (1974).
Contention that G.S. § 105-282.7 was invalid because its effect was to tax only the appellant was without merit, as on its face G.S. § 105-282.7 uniformly operates without discrimination or distinction upon all persons composing the described class, and as even appellant's own evidence did not show that the law applied only to appellant, but merely established that no one knew whether the statute had been applied to other taxpayers during the one year it had been in effect. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, cert. denied and appeal dismissed, 314 N.C. 540, 335 S.E.2d 15 (1985).
Subsection (32) of G.S. § 105-275 does not discriminate against individual property owners who own their property for residential purposes in violation of the rule of uniformity in taxation established under this Article. In re Barbour, 112 N.C. App. 368, 436 S.E.2d 169 (1993).
B. ILLUSTRATIVE CASES.
Assessment of tax under G.S. § 105-114 against a business trust did not violate the uniformity requirement of this section on grounds that it was similar to a limited partnership, which is not subject to the franchise tax. First Carolina Investors v. Lynch, 78 N.C. App. 583, 337 S.E.2d 691 (1985).
Additional Sales Tax in Certain Counties. - The Constitution does not permit State to levy a tax which discriminates in favor of or against taxpayers in the same classification, and this prohibition extends throughout the State. Hence, the State may not levy a tax in 25 counties and exempt 75 counties. Nor may the State set up a valid scheme by which that precise result is accomplished. Thus, additional 1% sales and use tax authorized by the Local Option Sales and Use Tax Act, which was a State tax, not a county tax, was unconstitutional since it was not uniformly applied to all taxpayers of the same class in all counties of the State. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
Levy imposed by the Local Option Sales and Use Tax Act was discriminatory in that it required one person to pay the tax involved and exempted his competitor in a county which voted against the tax. Both Nash and Edgecombe were exempt if either voted against the tax. Uniformity is required. No provision was made for partial uniformity, and for that reason the tax authorized under former G.S. § 105-164.45 was unconstitutional. Hajoca Corp. v. Clayton, 277 N.C. 560, 178 S.E.2d 481 (1971).
The capture of supplier refunds for use in establishing an expansion fund does not constitute a tax that violates the requirements of N.C. Const., Art. V, § 2. State ex rel. Utils. Comm'n v. Carolina Util. Customers Ass'n, 336 N.C. 657, 446 S.E.2d 332 (1994).
Contention that G.S. § 105-282.7 was invalid because its effect was to tax only the appellant was without merit, as on its face G.S. § 105-282.7 uniformly operates without discrimination or distinction upon all persons composing the described class, and as even appellant's own evidence did not show that the law applied only to appellant, but merely established that no one knew whether the statute had been applied to other taxpayers during the one year it had been in effect. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, cert. denied and appeal dismissed, 314 N.C. 540, 335 S.E.2d 15 (1985).
Leasehold Interests in Government Owned Croplands and Forestlands. - Classifying for taxation under G.S. § 105-282.7 leasehold interests in government owned croplands and forestlands that are used in connection with a business conducted for profit seems eminently reasonable. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, cert. denied and appeal dismissed, 314 N.C. 540, 335 S.E.2d 15 (1985).
Subsections (1) and (2) of this section, which require that taxation be done in a just and equitable manner and that no class of property be taxed except by uniform rule and that every classification be made by general law, are no bar to taxing lessee and users in forest lands owned by the State, under G.S. § 105-282.7, "to the same extent as if the lessee or user owned the property," while other leasehold interests are taxed at true value. In re Champion Int'l Corp., 74 N.C. App. 639, 329 S.E.2d 691, cert. denied and appeal dismissed, 314 N.C. 540, 335 S.E.2d 15 (1985).
Section § 113-156.1, requiring managers of ocean fishing piers to obtain a license, satisfies the requirements of uniformity, equal protection and due process under both the State and federal Constitutions, as the opportunity to establish an exclusive zone around ocean piers, pursuant to G.S. § 113-185(a), and the cost to the State of enforcing this zone, distinguishes ocean piers from other piers and provides reasonable grounds for their separate license tax classification. State v. Rippy, 80 N.C. App. 232, 341 S.E.2d 98 (1986).
Annexation of Federal Air Force Base. - The annexation of a federal Air Force base by the City of Goldsboro did not create unconstitutional tax classes. In re Ordinance of Annexation No. § 1977-4, 296 N.C. 1, 249 S.E.2d 698 (1978).
Payment of Costs by Inmates of State Institutions. - Chapter 143, Article 7 (G.S. § 143-117 et seq.), relating to the payment of costs by the inmates of State institutions, is not unconstitutional in contravention of this section. State ex rel. Dorothea Dix Hosp. v. Davis, 27 N.C. App. 479, 219 S.E.2d 660 (1975), aff'd, 292 N.C. 147, 232 S.E.2d 698 (1977).
The charges pursuant to G.S. § 143-117 are not made for the support of the government, nor are they related to or limited by the necessities of government. They represent the actual cost of the care, treatment and maintenance of a particular patient. It is not unequal or unjust taxation, nor taxation at all, to require a man to be supported out of his own estate. State ex rel. Dorothea Dix Hosp. v. Davis, 292 N.C. 147, 232 S.E.2d 698 (1977).
Provision for Collection of Taxes for Past Years. - A law to provide for the collection of taxes for past years does not violate the provisions of this section in regard to uniformity of taxation. North Carolina R.R. v. Commissioners of Alamance, 82 N.C. 259 (1880).
Requiring Railroads, etc., to Pay State Taxes Earlier. - Provisions requiring railroads and other like corporations to pay their State taxes within a shorter period than those to the counties is a uniform legislative classification applying equally to all within its terms and is not objectionable as discriminatory or as a denial of the equal protection of the laws prohibited by this section. Norfolk S.R.R. v. Lacy, 187 N.C. 615, 122 S.E. 763 (1924).
Tax Based on Volume of Business. - A tax levied quarterly by a town, under authority of an act of the General Assembly, upon all traders doing business in the town, of $1.00 for every $1,000.00 worth of goods sold during the preceding quarter, was uniform and constitutional. Gatlin v. Town of Tarboro, 78 N.C. 119 (1878).
Sales Tax on Satellite Service Versus Cable Service. - G.S. § 105-164.4(a)(6), which imposes a sales tax on direct-to-home satellite service, but not on cable television service, does not discriminate against satellite providers in favor of cable companies on its face and in its practical effect because the differential tax results solely from differences between the nature of the provision of satellite and cable services, and not from the geographical location of the businesses. DirecTV, Inc. v. State, 178 N.C. App. 659, 632 S.E.2d 543 (2006).
Tax Based on Counties in Which a Firm Does Business. - An act taxing every meat packing house doing business in the State $100.00 for each county in which such business is carried on is valid. Lacy v. Armour Packing Co., 134 N.C. 567, 47 S.E. 53 (1904), aff'd, 200 U.S. 226, 26 S. Ct. 232, 50 L. Ed. 451 (1905).
Tax Based on Size of City in Which Business Located. - An act imposing an annual graduated license tax on the business of buying and selling fresh meats from offices, stores, vehicles, etc., in cities of 12,000, 8,000, and under 8,000 inhabitants, respectively, is not unconstitutional, as not being uniform and in not imposing a license if the business is carried on outside a city or town; it being uniform as to all within each class. State v. Carter, 129 N.C. 560, 40 S.E. 11 (1901).
Tax on Receipt of Proceeds of Life Insurance Policy. - Public Laws 1937, c. 127, G.S. 11, could not be construed as imposing an excise tax upon the receipt of the proceeds of life insurance policies issued to the beneficiary who retained all rights and liabilities thereunder, in addition to imposing an inheritance tax on the proceeds of policies issued to the insured or in which he retained some incidents of ownership, since such excise tax would have to be computed in accordance with a graduated scale on the basis of the amount of insurance together with the value of the estate or the legacy or the distributive share, and thus would produce inequality in the levying of such excise tax in contravention of this section. Wachovia Bank & Trust Co. v. Maxwell, 221 N.C. 528, 20 S.E.2d 840 (1942).
Taxing Cotton by Bale. - An act to provide improved marketing facilities for cotton, which enacts that on each bale of cotton ginned in North Carolina for two years, 25 cents shall be collected to specially guarantee the State warehouse system against loss, is not in derogation of this section. Bickett v. State Tax Comm'n, 177 N.C. 433, 99 S.E. 415 (1919).
Exemption of Farm Products. - The exception of farm products purchased from the producer from the return required to be made by merchants and other dealers as the basis for a license tax is not a discrimination against the products or citizens of other states; nor is it in violation of this section, which requires uniformity of taxation. State v. Stevenson, 109 N.C. 730, 14 S.E. 385 (1891); Ex parte Brown, 48 F. 435 (E.D.N.C. 1891).
Business of Hauling Timber. - An act requiring a license of anyone who carries on the business of hauling timber in a certain county, grading the license with reference to the number of horses driven to the wagon used, is not repugnant to this section. State v. Bullock, 161 N.C. 223, 75 S.E. 942 (1912).
Dealers in Different Kinds of Merchandise. - The requirement of this section that all taxes shall be uniform does not prohibit a municipality, which is empowered to tax persons engaged in merchantile business, from classifying dealers in a particular kind of merchandise separately from those whose business it is to sell other articles falling within the same generic terms. Rosenbaum v. City of Newbern, 118 N.C. 83, 24 S.E. 1 (1896).
Fireman's Pension Fund. - Session Laws 1957, c. 1420, creating the North Carolina Fireman's Pension Fund, violated this section for lack of uniformity, in that it exempted members of the Farmers' Mutual Fire Insurance Association from adding the tax imposed by the act to their premiums and collecting it from purchasers of their insurance, as other companies selling similar insurance were required to do by the act. American Equitable Assurance Co. v. Gold, 249 N.C. 461, 106 S.E.2d 875 (1959); In re North Carolina Fire Ins. Rating Bureau, 249 N.C. 466, 106 S.E.2d 879 (1959).
Hotelkeepers. - A tax is uniform and consistent with this section when it is equal on all persons in the same class; and hence a tax imposed on hotelkeepers, which exempts from taxation those whose yearly receipts are less than $1,000.00, is not unconstitutional. Cobb v. Commissioners of Durham County, 122 N.C. 307, 30 S.E. 338 (1898).
Household Property. - Because there is some reasonable relationship between the value of a home and the value of the household property within, the percentage method is a reasonable one in accomplishing the object of determining the market value of household property, and thus there is no violation of subsection (2) of this section. In re Bosley, 29 N.C. App. 468, 224 S.E.2d 686, cert. denied, 290 N.C. 551, 226 S.E.2d 509 (1976).
Mechanical Vending Devices. - While the legislature may not classify mechanical vending machines in accordance with the kinds of merchandise sold by such machines in levying privilege taxes on their use, since the manner in which the article is sold is the same in all instances and the economic advantages in this method of sale may be regarded as the same, it may classify mechanical vending devices for the purpose of taxation and make a further classification or subclassification in accordance with the quantity or kind of commodities sold by such method, when such classifications are based upon real and reasonable distinctions. Snyder v. Maxwell, 217 N.C. 617, 9 S.E.2d 19 (1940).
Real Estate Brokers. - Public-Local Laws 1927, c. 241, requiring real estate brokers in certain designated counties to be licensed by a real estate commission on the basis of moral character and proficiency in the public interest, and requiring payment of a license fee in addition to the statewide license required, was unconstitutional, as it applied only to real estate brokers in the designated counties and was therefore discriminatory. State v. Warren, 211 N.C. 75, 189 S.E. 108 (1937).
Wholesale Grocers. - A special classification by statute of wholesale grocers operating a cold storage chamber of some character for the preservation of fresh meats, as distinguished from those who handled only canned meats not requiring refrigeration, was a reasonable classification imposing an equal burden upon all of the class, and was constitutional and valid. Southern Grain Provision Co. v. Maxwell, 199 N.C. 661, 155 S.E. 557 (1930).
Imposition of privilege tax on a live entertainment business under G.S. § 105-37.1 was unconstitutional because movie theaters had been exempted from the operation of that tax without a rational basis. Deadwood, Inc. v. N.C. Dep't of Revenue, 148 N.C. App. 122, 557 S.E.2d 596 (2001), appeal dismissed, cert. denied, 355 N.C. 490, 563 S.E.2d 565 (2002).
Privilege Tax on Cyber-Gambling Establishments Was Constitutional. - City's privilege license tax on cyber-gambling establishments did not violate N.C. Const., Art. V, § 2(2) because the tax uniformly applied to all persons engaged in the cyber-gambling business. IMT, Inc. v. City of Lumberton, 219 N.C. App. 36, 724 S.E.2d 588 (2012).
City's privilege license tax on cyber-gambling establishments was not invalid because it exempted state-endorsed lotteries from taxation, as the state-endorsed lotteries provided net revenues to the state Education Lottery Fund and, thus, reasonably constituted a separate classification from unendorsed gambling. IMT, Inc. v. City of Lumberton, 219 N.C. App. 36, 724 S.E.2d 588 (2012).
Taxpayers' claim that a city's privilege license tax on cyber-gambling establishments violated N.C. Const., Art. V, § 2(1) by imposing an unjust and inequitable taxation scheme failed because they provided no evidence that the tax would completely deprive them of all profit associated with their businesses. IMT, Inc. v. City of Lumberton, 219 N.C. App. 36, 724 S.E.2d 588 (2012).
A. IN GENERAL.
All property is subject to taxation unless exemption is authorized by the Constitution and laws of the State. Piedmont Mem. Hosp. v. Guilford County, 221 N.C. 308, 20 S.E.2d 332 (1942).
Legislature May Not Grant Exemptions Beyond What Is Permitted in this Section. - The provisions of the revenue act exempting property from taxation must be considered in connection with this section, since the General Assembly has no power to exempt property from taxation beyond the permissive power granted it by this section. Sir Walter Lodge, No. 411 v. Swain, 217 N.C. 632, 9 S.E.2d 365 (1940).
Strict Construction of Exemptions. - Statutes enacted by the General Assembly exempting specific property from taxation, because of the purposes for which such property is held and used, are and should be construed strictly, when there is room for construction against exemption and in favor of taxation. Salisbury Hosp. v. Rowan County, 205 N.C. 8, 169 S.E. 805 (1933); Piedmont Mem. Hosp. v. Guilford County, 218 N.C. 673, 12 S.E.2d 265 (1940); Harrison v. Guilford County, 218 N.C. 718, 12 S.E.2d 269 (1940).
Tax Exemption for State and Local Government Employees' Retirement Benefits. - The tax exemption for retirement benefits of state and local employees was a term or condition of retirement systems to which the employees had a contractual right and it did not constitute an unconstitutional contracting away of the state's sovereign power of taxation. Bailey v. State, 348 N.C. 130, 500 S.E.2d 54 (1998).
Legislature Must Observe Basic Principle of Equality. - The legislature, in exempting property from taxation, is required to observe the basic principle of equality, and exemptions allowed by it must be uniform within the class as required by this section. Sir Walter Lodge, No. 411 v. Swain, 217 N.C. 632, 9 S.E.2d 365 (1940).
Educational Exemption Upheld. - The court upheld G.S. § 105-278.4, the educational exemption statute, in spite of a seminary's challenge on constitutional grounds that it applied unequally to various property tracts and violated the rule of uniformity; the four requirements of the section were reasonably objective and did not result in any hostile or systematic discrimination and, further, the exemption requirements were sufficiently enumerated. In re Southeastern Baptist Theological Seminary, Inc., 135 N.C. App. 247, 520 S.E.2d 302 (1999).
Section Applies Only to Ad Valorem Taxes. - Any intent or attempt, on the part of the legislature, to grant an exemption from any tax or assessment on real property, pursuant to the provisions of this section, other than for ad valorem taxes, would be without constitutional authorization. Raleigh Cem. Ass'n v. City of Raleigh, 235 N.C. 509, 70 S.E.2d 506 (1952).
This section refers solely and directly to exemptions from ad valorem taxation of property otherwise subject thereto. Sykes v. Clayton, 274 N.C. 398, 163 S.E.2d 775 (1968).
The constitutional limitations set forth in this section relate solely to the taxation of real and personal property, tangible and intangible, according to the value thereof, and are irrelevant in respect of the validity of a local sales and use tax act. Sykes v. Clayton, 274 N.C. 398, 163 S.E.2d 775 (1968).
Does Not Grant Exemption from Special or Local Assessments. - Property belonging to municipal corporations is not exempt from assessment for local improvements. Raleigh Cem. Ass'n v. City of Raleigh, 235 N.C. 509, 70 S.E.2d 506 (1952).
The general rule that exemption from taxation does not mean exemption from a special or local assessment applies with respect to cemetery property. Raleigh Cem. Ass'n v. City of Raleigh, 235 N.C. 509, 70 S.E.2d 506 (1952).
Assessments on public school property for special benefits thereto, caused by improvement of the street on which it abuts, are not embraced within the prohibition of this section exempting property belonging to the State or to municipal corporations from taxation. City of Raleigh v. Raleigh City Admin. Unit, 223 N.C. 316, 26 S.E.2d 591 (1943); Raleigh Cem. Ass'n v. City of Raleigh, 235 N.C. 509, 70 S.E.2d 506 (1952).
Local assessments against lands along the streets of a city for paving and improving the streets do not fall within the intent and meaning of this section. Town of Tarboro v. Forbes, 185 N.C. 59, 116 S.E. 81 (1923).
Former G.S. § 160-521, exempting railroad right-of-way property from assessment for local improvements, was not unconstitutional on grounds that it was not authorized by this section, since this section deals with the power of taxation and not with assessments for local improvements. Southern Ry. v. City of Raleigh, 9 N.C. App. 305, 176 S.E.2d 21 (1970), aff'd, 277 N.C. 709, 178 S.E.2d 422 (1971).
Property in Hands of Trustee. - Where, in construing a devise of various property in a city, the courts decreed that the lands should be sold within a period of five years and that 55% of the proceeds should be distributed among several beneficiaries of the class exempted by this section, the property itself was not held by the beneficiaries designated, but by the trustee in trust for the purpose of sale and distribution of part of the proceeds of the sale to them, and the exemption only applied to the proceeds of the sale when received by the beneficiaries in accordance with the decree, and the lands in the hands of the trustee were subject to taxation. Latta v. Jenkins, 200 N.C. 255, 156 S.E. 857 (1931).
B. STATE, COUNTY AND MUNICIPAL PROPERTY.
Excise taxes on municipal property are not prohibited. Stedman v. City of Winston-Salem, 204 N.C. 203, 167 S.E. 813 (1933).
Provision Exempting Public Property Is Self-Executing. - The provision of this section that property belonging to or owned by the State or municipal corporations shall be exempt from taxation is self-executing and requires no legislation to make it effective. Salisbury Hosp. v. Rowan County, 205 N.C. 8, 169 S.E. 805 (1933). See also, Piedmont Mem. Hosp. v. Guilford County, 218 N.C. 673, 12 S.E.2d 265 (1940); Raleigh Cem. Ass'n v. City of Raleigh, 235 N.C. 509, 70 S.E.2d 506 (1952).
Applies Regardless of Purpose for Which Property Is Held. - Property owned by the State is exempt from ad valorem taxation by subsection (3) of this section solely by reason of State ownership. Thus, G.S. § 105-278.1, requiring property owned by the State to be held exclusively for a public purpose in order to be exempt from taxation, is unconstitutional. Therefore, the Towns of Chapel Hill and Carrboro and the County of Orange may not assess ad valorem taxes against any property owned by the Univ. of North Carolina, an agency of the State, regardless of the purpose for which the property is held. In re Univ. of N.C. 300 N.C. 563, 268 S.E.2d 472 (1980).
Subsection (3) of this section provides that property "belonging to the State, counties and municipal corporations shall be exempt from taxation." It places no requirement, other than ownership, upon property to entitle it to exemption. In re Univ. of N.C. 300 N.C. 563, 268 S.E.2d 472 (1980).
The case of Redevelopment Comm'n v. Guilford County, 274 N.C. 585, 164 S.E.2d 476 (1968), was based on the premise that all of the Commission's property was held for public or governmental purposes; therefore, the opinion's review of prior cases interpreting the constitutional exemption for State and municipally owned property, and the court's conclusion that allowing the exemption only for property used for public or governmental purposes was correct, must be characterized as obiter dictum. In re Univ. of N.C. 300 N.C. 563, 268 S.E.2d 472 (1980).
The holdings of cases misapplying the holding of Atlantic & N.C.R.R. v. Board of Comm'rs, 75 N.C. 474 (1876), as mandating a "public purpose" requirement for exemption of State-owned property under the North Carolina Constitution, namely, Board of Fin. Control v. County of Henderson, 208 N.C. 569, 181 S.E. 636 (1935); Town of Benson v. County of Johnston, 209 N.C. 751, 185 S.E. 6 (1936); Town of Warrenton v. Warren County, 215 N.C. 342, 2 S.E.2d 463 (1939); and City of Winston-Salem v. Forsyth County, 217 N.C. 704, 9 S.E.2d 381 (1940), must be considered not in keeping with the rationale expressed in this case and in opinions of the Court of Appeals. In re Univ. of N.C. 300 N.C. 563, 268 S.E.2d 472 (1980).
When Exemption Attaches. - The quality of exemption attaches to property as soon as it is lawfully acquired and remains with such property so long as it is owned by the municipal corporation, without regard to the purpose for which it was acquired or was held. Town of Andrews v. Clay County, 200 N.C. 280, 156 S.E. 855 (1931).
Corporation, to Be Exempt, Must Be Subordinate Branch of State or Local Government. - In order to come within the constitutional orbit of tax exemption, a corporation must be an instrumentality, an agent, a department, or an arm of the State in the sense of being at least a subordinate branch of the State government or of a local subdivision thereof and subject to governmental visitation and control, so that ordinarily the interests and franchises pertaining to the corporation are either the exclusive property of the government itself or are under the exclusive control of some agency or political subdivision thereof. Carolina-Virginia Coastal Hwy. v. Coastal Tpk. Auth., 237 N.C. 52, 74 S.E.2d 310 (1953).
Because a limited liability company was wholly controlled by subsidiary corporations of a Housing Authority, the property belonged to the Housing Authority for the purposes of G.S. § 105-278.1(b); therefore, the property was exempted from ad valorem taxation according to N.C. Const., Art. V, § 2(3) and G.S. § 105-278.1. In re Appeal of Fayette Place LLC, 193 N.C. App. 744, 668 S.E.2d 354 (2008).
Corporation Composed of Shareholders Is Not a Municipal Corporation. - A municipal corporation is one designed to create within a prescribed territory a local government of the people therein, as a part of that exercised by the State, with certain and defined restrictions, and this section, exempting municipal corporations from taxation, does not include within its meaning or intent a corporation composed of shareholders, which in its form and controlling features is a business enterprise upon which municipal powers have been incidentally conferred in promotion of its primary purpose. Southern Ass'y v. Palmer, 166 N.C. 75, 82 S.E. 18 (1895).
Drainage Districts Are Not Municipal Corporations. - Drainage districts are not regarded as municipal corporations within the purview of this section, and a legislative act exempting their bonds from taxation violates the uniform rule as to taxation required by this section. Drainage Comm'rs v. C.A. Webb & Co., 160 N.C. 594, 76 S.E. 552 (1912).
A redevelopment commission is a municipal corporation for the purpose of tax exemption. Redevelopment Comm'n v. Guilford County, 274 N.C. 585, 164 S.E.2d 476 (1968), criticized on other grounds in In re Univ. of N.C. 300 N.C. 563, 268 S.E.2d 472 (1980).
Property owned by the Medical Care Commission, including hospital facilities leased to private nonprofit associations for operation, is property owned by the State within the meaning of this constitutional provision, making the exemption of such property from taxation mandatory. Foster v. North Carolina Medical Care Comm'n, 283 N.C. 110, 195 S.E.2d 517 (1973).
Realty acquired for purposes of a rural housing authority is exempt from taxation under this section. Mallard v. Eastern Carolina Regional Hous. Auth., 221 N.C. 334, 20 S.E.2d 281 (1942).
Privilege Tax on Cyber-Gambling Establishments was Unconstitutional. - City's license privilege tax adopted pursuant to G.S. § 105-109(e) and G.S. § 160A-211, which represented a 59,900 percent increase in taxation for cyber-gambling businesses, was unconstitutional under the Just and Equitable Tax Clause, N.C. Const., Art. V, § 2, and as a result, the lower courts erred in granting the city summary judgment. IMT, Inc. v. City of Lumberton, 366 N.C. 456, 738 S.E.2d 156 (2013).
C. EXEMPTION OF PROPERTY BY GENERAL ASSEMBLY.
Provision as to Exemption of Property Used for Educational, etc., Purposes Is Not Self-Executing. - The provision of this section that the General Assembly may exempt from taxation property held for educational, scientific, literary, charitable or religious purposes is a grant of power and is not self-executing, and the power of the legislature to prescribe such exemptions is limited by the terms of the grant. Piedmont Mem. Hosp. v. Guilford County, 218 N.C. 673, 12 S.E.2d 265 (1940).
Under subsection (3) of this section, the legislature may exercise, to the full extent or in part, the power to exempt from taxation property held for educational, scientific, literary, charitable or religious purposes, or may decline to exempt such property at all. The constitutional provision being in the disjunction, the legislature may exempt the property up to a certain value and tax all above it, and may also tax property held for one of the purposes named and exempt that held for others. Congregation of United Brethren v. Commissioners of Forsyth County, 115 N.C. 489, 20 S.E. 626 (1894). See also, Salisbury Hosp. v. Rowan County, 205 N.C. 8, 169 S.E. 805 (1933).
Nor Is Provision as to Property Used as Residence. - The third sentence of subsection (3) of this section is only permissive in terms and is not self-executing. The power of exemption, to the extent therein mentioned, is exercisable, in whole or in part, or not at all, as the General Assembly, in its wisdom, shall determine. Nash v. Board of Comm'rs, 211 N.C. 301, 190 S.E. 475 (1937).
Power of Legislature to Grant Such Exemptions Is Limited. - The power of the legislature to exempt from taxation property not owned by the State or its political subdivisions is limited and restricted by the scope of the constitutional grant of the permissive power of exemption. County of Rockingham v. Board of Trustees, 219 N.C. 342, 13 S.E.2d 618 (1941). See also, Trustees of Guilford College v. Guilford County, 219 N.C. 347, 13 S.E.2d 622 (1941).
The power to grant exemptions under authority of the second sentence in subsection (3) of this section, which may be exercised in whole, or in part, or not at all, as the General Assembly shall elect, is limited to property held for one or more of the purposes therein designated. County of Rockingham v. Board of Trustees, 219 N.C. 342, 13 S.E.2d 618 (1941). See also, Trustees of Guilford College v. Guilford County, 219 N.C. 347, 13 S.E.2d 622 (1941).
Use to Which Property Is Devoted Controls. - Under this section, it is the use to which the property is devoted and to the extent of the interest so dedicated which should control, rather than the title or other tenure by which it is held, and its provisions are broad and comprehensive enough to uphold the legislative exemption as to all property used exclusively for educational purposes. State ex rel. Corp. Comm'n v. Oxford Sem. Constr. Co., 160 N.C. 582, 76 S.E. 640 (1912).
The power granted to the legislature to exempt property from taxation is limited by the language of this section to property held for educational, scientific, charitable or religious purposes, the purpose for which the property is held and not the character of the corporation or association holding the property being the basis for the grant of permissive power to exempt; and thus, the legislature has no power to exempt property held by a religious or charitable corporation or organization for business or commercial purposes. Sir Walter Lodge, No. 411 v. Swain, 217 N.C. 632, 9 S.E.2d 365 (1940).
Weight of Fact That Institution Has Not Been Paying Taxes. - The fact that an educational incorporation had gone for a long period of time without paying taxes, unchallenged by both the legislative and executive department of the government, is deserving of great weight by the court in construing this section. State ex rel. Corp. Comm'n v. Oxford Sem. Constr. Co., 160 N.C. 582, 76 S.E. 640 (1912).
No Distinction Between Public and Private Institutions. - The provisions of this section make no distinction between public and private educational corporations, or between institutions which are in part conducted for the personal profit of the owner and those which are run on a salary basis, using any profits which may arise in the extension of the work. State ex rel. Corp. Comm'n v. Oxford Sem. Constr. Co., 160 N.C. 582, 76 S.E. 640 (1912).
Church Lot. - A lot purchased by the trustee of a church for the purpose of erecting a new church and Sunday school thereon, which pending the accumulation of sufficient funds to build the new church, was used exclusively for open air Sunday school and church meetings, was property held for religious purposes within the meaning of this section, and the legislature had the power to exempt such property from taxation. Harrison v. Guilford County, 218 N.C. 718, 12 S.E.2d 269 (1940).
Property owned by a church and rented by it for commercial purposes, and the rent used for religious purposes, is not exempt from taxation. Sparrow v. Beaufort County, 221 N.C. 222, 19 S.E.2d 861 (1942).
Business property owned by an educational institution and rented to private enterprises for offices and business purposes, the net profit derived therefrom being devoted exclusively to educational purposes, was not within the exemption granted by this section. County of Rockingham v. Board of Trustees, 219 N.C. 342, 13 S.E.2d 618 (1941). See also, Trustees of Guilford College v. Guilford County, 219 N.C. 347, 13 S.E.2d 622 (1941).
Property of North Carolina Housing Finance Agency. - Since Chapter 122A and the North Carolina Housing Finance Agency's activities pursuant thereto are for a public purpose, it is permissible for the General Assembly to exempt from taxation the property of the Agency and the obligations incurred by the Agency to effectuate such public purpose. Martin v. North Carolina Hous. Corp., 277 N.C. 29, 175 S.E.2d 665 (1970).
Bonds. - While the enumerated properties under this section do not expressly include bonds issued by the State or any State agency, whether revenue bonds or full faith and credit bonds, it is nevertheless generally considered that the legislature of a state has the power to exempt state and municipal bonds from taxation, since if such bonds are exempt from taxation the state or municipality will be able to issue them on more favorable terms and may then save more money than it would lose by being deprived of the right to tax them. A legislature may exempt such securities from taxation, even if the Constitution enumerates the subjects of exemption, and does not specifically name government securities, and even in the face of a constitutional declaration forbidding passage of laws exempting any property. State Educ. Assistance Auth. v. Bank of Statesville, 276 N.C. 576, 174 S.E.2d 551 (1970).
A legislative provision exempting the property and bonds of a city from taxation is valid when the bonds are to be issued for a public purpose, and certainly the bonds are exempt from taxation if sold to and held by an agency of the United States government, or are held by a purchaser from such federal agency. Any doubt as to the validity of this provision under this section must be resolved in favor of its validity. Webb v. Port Comm'n, 205 N.C. 663, 172 S.E. 377 (1934).
Bonds issued by a municipality to provide schoolhouses and equipment were for a public purpose, and since the bonds, although the property of a private corporation, were issued for a necessary public purpose and purchased in reliance upon the statutory provision exempting them from taxation, they would stand upon the same footing as the school buildings erected with the proceeds of the bonds. County of Mecklenburg v. Piedmont Fire Ins. Co., 210 N.C. 171, 185 S.E. 654 (1936).
The provisions of Session Laws 1967, c. 1177 (G.S. § 116-209.1 et seq.) that exempt student loan revenue bonds from taxation by the State or by any of its subdivisions do not contravene this section. State Educ. Assistance Auth. v. Bank of Statesville, 276 N.C. 576, 174 S.E.2d 551 (1970).
Since the tax-exempt feature makes possible the more favorable sale of revenue bonds and thereby contributes substantially to the accomplishment of the public purpose for which they are issued, the General Assembly may exempt such bonds from taxation by the State or any of its subdivisions. Martin v. North Carolina Hous. Corp., 277 N.C. 29, 175 S.E.2d 665 (1970).
Standing. - Citizens lacked standing to appeal a trial court's grant of a G.S. § 1A-1, N.C. R. Civ. P. 12(b)(1) motion to dismiss by the State of North Carolina, various state officials, and two companies, in a case challenging G.S. § 105-164.3 and G.S. § 105-164.13. The citizens had asserted that the 2006 Current Operations Appropriations Act was violative of the uniformity in taxation provisions of N.C. Const., Art. V, § 2(1) and 2(2) and the law of the land clause of N.C. Const., Art. I, § 19. Munger v. State, 202 N.C. App. 404, 689 S.E.2d 230 (2010).
Uniformity Clause Not Violated. - That the North Carolina Property Tax Commission granted an ad valorem tax exemption under G.S. § 105-278.6(a)(8) to a taxpayer with a 0.1 percent ownership in the property, but the taxpayer was denied the exemption for similar projects by other counties, did not equate to a violation of the Equal Protection Clause of U.S. Const., amend. XIV or the Uniformity Clause of N.C. Const., Art. V, § 2(2), as (1) there was no evidence of "hostile discrimination" in the application of G.S. § 105-278.6(a)(8); and (2) the evidence indicated that all the counties applied a uniform rule. In re Appeal of Blue Ridge Hous. of Bakersville LLC, 226 N.C. App. 42, 738 S.E.2d 802 (2013), dismissed and review granted 747 S.E.2d 526, 2013 N.C. LEXIS 723 (2013).
Opinions of Attorney General
Public Recreation Facilities. - The expenditure of public funds for the construction and maintenance of public parks and recreational facilities was for a "public purpose" within the meaning of Art. V, § 3, Const. 1868, for which public monies might be spent, and the mere fact that such facilities were to be constructed on property which might revert to the grantor at some indefinite future time would not affect the purpose for which the expenditures were made. See Opinion of Attorney General to Mr. Francis M. Coiner, Hendersonville City Attorney, 40 N.C.A.G. 494 (1969).
Appropriation for a water project which would provide a private industry with fire protection and a private water supplier and town with increased water service was for a public purpose in compliance with this section. See opinion of Attorney General to Mr. Steve B. Settlemeyer, City Attorney, 59 N.C.A.G. 12 (1989).
Local School Administrative Unit Levying Taxes at Local Level. - The legislature may by statute, consistently with the Constitution, provide that a local school administrative unit may levy taxes at the local level but such taxing authority must be conferred either by a general law, applicable statewide, or by local act subject to a vote of those persons affected. See opinion of Attorney General to Mr. John B. Dunn, Superintendent, Edenton-Chowan Schools, 60 N.C.A.G. 17 (1990).
Town's Tax Rebate Program. - It could reasonably be argued that a Business Development Investment Grant program's tax rebate scheme, designed to offer tax rebates for the purposes of "diversify[ing] the tax base, offer[ing] improved employment opportunities for citizens" and "promot[ing] economic growth," complied with the uniformity rule of this section. See opinion of Attorney General to Robert B. Smith, Jr., Smith and Gamblin, PLLC Attorneys at Law, 1997 N.C.A.G. 55 (8/29/97).
Proposed conference center/hotel and golf course on Centennial Campus of North Carolina State University would not necessarily fall outside a contemporary application of "public purpose" analysis, as set out in Maready v. City of Winston-Salem, 342 N.C. 708 (1996). See opinion of Attorney General to Representative Martin L. Nesbitt, North Carolina General Assembly, 2002 N.C.A.G. 33 (11/26/02).
Town Located Within Two Counties. - Session Laws § 2001-439 and § 2002-94 pertaining to the levy of an occupancy tax by cities in Avery County did not specifically authorize the levying of the tax throughout the entire town of Seven Devils, which is located within both Avery and Watagua counties. See opinion of Attorney General to Rebecca Eggers-Gryder, Eggers, Eggers, Eggers, and Eggers, 2003 N.C.A.G. 1 (1/23/03).