If you are a builder or developer holding improved property for sale as inventory, part of that property's value may be exempt from tax for a limited number of years. The exemption is not automatic. You have to apply by January 31, and a year you miss is a year you lose.

What the exemption covers

The exemption applies to the value your work created on property that is being held for sale. It does not exempt the land you started with, and it does not cover every kind of structure.

May be exempted

  • Value created by subdividing land
  • Non-structural improvements
  • Structural improvements, but only on a one- or two-family residence
  • Property offered for sale on the market

Does not qualify

  • Structures built for three or more families
  • Commercial and industrial structures
  • Property occupied by a tenant
  • Property used as a model home

The Builders Inventory Exemption applies only to improvements made on or after July 1, 2015. Improvements made before that date are not eligible, no matter when the application is filed.

Residential property: three tax years

For a single-family or two-family residence, the benefit applies to the first three years in which the property would otherwise be taxable.

  • 2019 Construction begins. This is the example year used below.
  • January 31, 2020 The one-time application is due, in the first year the property would be taxable.
  • 2020, 2021, 2022 The three tax years that may be exempt.

A year you miss is a year you lose. Using the same example: if you did not apply in January 2020 and instead applied in 2021, the 2020 bill is not exempted after the fact, and the benefit does not shift forward into 2023 to make up for it. One year of the benefit is simply gone.

Commercial and industrial property: land only, five tax years

Commercial and industrial structures never qualify. The land work behind them can, until the first permit for a structure is issued. As long as the property stays land-only and is held for sale by the builder or developer, the exemption may be granted for up to five years after the improvement was first required to be listed for taxes.

  • 2019 Construction begins. This is the example year used below.
  • 2020 through 2024 Up to five tax years, for subdivision of land and non-structural improvements only.
  • First permit Eligibility ends when the first permit for a structure is issued on the property.
As with residential property, this takes a one-time application filed by January 31 of the year you are applying for.

Who counts as a builder or developer

State law defines a builder or developer as a taxpayer engaged in the business of buying real property, making improvements to it, and reselling it. [N.C.G.S. 105-273(3a)]

Eligible

  • You are in the business of buying, improving and reselling real property
  • You are the owner who constructed the improvements

Not eligible

  • You bought the improved property from another builder or developer
  • You made the improvements but are not a builder or developer
If one builder or developer buys from another, the exemption on the value that came with the purchase is lost. Value the new owner adds after the transfer could still be eligible on its own.

When the exemption ends

The exemption is tied to holding the property for sale. Three things end it early, and the date it ends decides how that whole year is taxed.

  • Sold Any transfer into another ownership, including the sale of a finished home, ends the exempt status.
  • Rented If the property is occupied by a tenant, or otherwise stops being held for sale, the exempt status is lost.
  • Permitted On commercial and industrial property, the first permit for a structure ends eligibility.

When in the year did the property stop qualifying?

July 1 or later The property stays exempt for the entire year.
June 30 or earlier The property is taxable for the entire year.

How to apply

File one application, on time. There is no annual renewal, and there is no way to pick up a year you missed.

Application deadline: January 31 of the year for which you are applying. A one-time application must be made for the exemption to be received.

Form: Exemption (Builders Inventory) [AV-65]

Common questions

Do I have to apply every year?

No. One application covers the exemption period. It has to be filed by January 31 of the year you are applying for, and the first filing has to be on time.

I missed the January deadline. Can I get that year back?

No. The earlier bill is not exempted retroactively, and the benefit does not extend at the back end to make up for it.

Does a model home qualify?

No. The property has to be offered for sale on the market and not occupied by a tenant or used as a model home.

What if I rent the house out while it is listed?

Renting it ends the exemption. Once the property is occupied by a tenant it is no longer being held for sale.

Does an apartment or commercial building qualify?

The structure does not. On commercial and industrial property, subdivision of land and non-structural improvements may still qualify until the first permit for a structure is issued.

I bought the lots from another developer. Am I eligible?

Not for the value that came with the purchase. Value you add after the transfer could be eligible on its own.

The home sold mid-year. How is that year taxed?

It depends on the date. Exempt status lost on June 30 or earlier makes the property taxable for the whole year. Lost on July 1 or later, it stays exempt for the whole year.

Does this apply to older improvements?

No. The exemption applies only to improvements made on or after July 1, 2015.

The Builders Inventory Exemption is one of several North Carolina property tax relief programs administered by this office. See Tax Relief Programs for the others.

Contact the Tax Department

Phone(336) 228-1312

Address124 W. Elm St., Graham, NC 27253

Application deadlineJanuary 31

This page summarizes the Builders Inventory Exemption for property owners in Alamance County. It is a summary, not legal advice, and the statute controls. If you are not sure whether a parcel qualifies, or which year your exemption should start, call the Tax Department before January 31 rather than after.